the number of potential bankrupts among borrowers increased by 11%

According to the United Credit Bureau (UCB), as of November 2023, 9.79 million, or almost 20% of all borrowers of banks and microfinance organizations, are potentially facing bankruptcy. And although the trend towards increased bankruptcies will mainly affect unsecured lending and microfinance, it is already having a significant impact on the collection market – the share of “young” overdue loans is growing. The number of bankruptcies will continue to rise as the pace of consumer lending slows amid tightening regulation.

The number of potential bankrupts (individuals with overdue loans of 90 days or more) and their total debt, including interest, increased by 11% annually, OKB reported. According to the bureau as of November 2023, 9.79 million borrowers, whose total debt is 6.33 trillion rubles, can theoretically go through the bankruptcy procedure. A year earlier, there were 8.81 million such borrowers with a total debt of 5.68 trillion rubles.

According to the latest data from the Bank of Russia, the total number of borrowers in banks and microfinance organizations as of July 1, 2023 is estimated at 47 million people (an increase of 2 million people over the first half of the year). Thus, the share of possible bankrupts is almost 20%.

This does not mean that all borrowers with debt overdue for 90 days or more will become bankrupt, but some households are at risk, clarifies Nikolai Filippov, director of risk methodology and data analytics at OKB.

According to the EFRSB, in the overwhelming majority of cases, citizens initiate their own bankruptcy – in 96.6% of cases, creditors do this in 3.1% of cases, the remaining 0.4% of applications come from the Federal Tax Service.

“Almost 90% of citizens who filed an application are declared bankrupt. Over the nine months of 2023, there were about 250 thousand such applications, and most likely by the end of the year the number will reach 300 thousand,” Vyacheslav Kosakov, managing partner of NOVATOR Legal Group, cites data.

The trend towards increasing bankruptcies is mainly faced by the microfinance and unsecured consumer lending segments, market participants believe.

“Against the background of an increase in the key rate and, as a consequence, an increase in rates on bank loans, the dynamics of lending to individuals will gradually slow down. This may lead to a gradual increase in the share of overdue loans in the retail loan portfolio as the debt gradually matures,” explains Ksenia Yakushkina, director of bank ratings at the Expert RA agency. “We believe that these trends will mainly be characteristic of unsecured products, historically default secured loans are much lower.”

At the same time, the share of young overdue loans is increasing: creditors try to sell problem debts before debtors use the bankruptcy procedure, and collectors prefer to buy portfolios with a low level of potential bankruptcy. “Over three years, the volume of “young” overdue debt in collectors’ portfolios increased 2.6 times, to 37% of the total debt sold,” confirms NAPCA.

In Rosbank, the share of bankruptcies in the portfolio (both in absolute terms and as a percentage) remains at a stable level, assured the director of the department for working with overdue debt of the credit institution, Evgeny Senkovsky: “We do not expect that the number of bankrupts will increase in banks.” “For banks, the increase in bankruptcy depends on the quality of the loan portfolio and its security (collateral, mortgages, and so on). Often, the amount of debt repayment through bankruptcy is about 9%,” clarifies Vyacheslav Kosakov.

That is why many banks prefer to deal with “young” overdue loans on their own. VTB, for example, does not sell early overdue loans, said Evgeny Novikov, head of the bank’s financial settlement department, and only includes loans that are overdue for more than a year in the assignment portfolio.

Polina Trifonova, Maxim Builov, Yulia Poslavskaya, Olga Sherunkova, Anna Zanina