VTB mastered small forms – Kommersant

Lending to customers for small amounts on the principle of MFIs, but with lower rates, is becoming increasingly popular among large Russian banks. Following the main competitors, VTB began to provide such a service. Such a strategy helps to retain customers and brings high income, but carries the risk of reducing the quality of the loan portfolio, experts warn.

The second largest Russian bank in terms of assets, VTB, announced the launch of lending to individuals for small amounts: 5-30 thousand rubles. for up to 11 months. The Bank does not disclose rates on such loans. According to the Central Bank, the maximum total cost of loans (TCP) in the amount of up to 30 thousand rubles. for the second quarter of 2023 is 35–45% per annum. During the preliminary testing, the bank issued 20 thousand loans (for 300 million rubles), and by the end of the year plans to issue more than 250 thousand loans.

The issuance of microcredits has already begun to be tested by such large players as Sberbank, Alfa Bank, Post Bank, Tinkoff Bank (see “Kommersant” dated July 14, 2021). Alfa-Bank noted that microcrediting for individuals is “in the development stage.” Microcredits are also offered by HCF-Bank and Zenit Bank.

Mikhail Doronkin, managing director of the NKR rating agency, calls the interest rate lower than that of MFIs an advantage for clients.

They make it possible to use credit resources, especially when other types of them are unavailable for various reasons, in particular, this is relevant in case of a faulty credit history, says Oksana Baida, Director for Cash Loans and Online Services at HCF Bank. Over time, a credit institution may offer a cross-sale of a loan product for a large amount, adds Alexander Shornikov, director of the Zenit retail risk department.

At the same time, analysts point to the risks of reducing the quality of the banks’ portfolio. Independent expert Andrei Barkhota explains that the size of a microloan is comparable to the average initial limit on a credit card, for which the interest-free period can be up to three to five months, therefore, the preference for a cash loan instead of a card already speaks of problems with the creditworthiness of customers.

It all comes down to profitability and technological cost – the restrictions on TICs that apply to banks, as a rule, do not allow for small loan amounts to cover direct operating costs and credit risk for issuing a product with a small check, says Mr. Shornikov. As a result, some banks, having tried “micro-products”, are already refusing them. For example, MTS-Bank did this, but later it abandoned this product (see Kommersant on February 5).

The long-term success of the product will largely depend on the manufacturability of procedures, as well as the speed of issuing “nanocredits”, since the segment in this context is very demanding, Vladimir Teterin, Senior Director for Banking Ratings at Expert RA, believes. The digitalization of credit processes, carried out in recent years, allows borrowers to apply online, and the consideration and approval of the application in banks occurs using automatic algorithms, adds Dmitry Monastyrshin, an analyst at the Banking and Financial Markets Analysis Department at PSB.

Meanwhile, Russian banks are also developing microcredit through subsidiaries or related microfinance companies. One of the largest in terms of financial indicators are T-Finance (along with Tinkoff Bank, it is part of the TCS Group) and OTP-Finance (together with OTP-Bank, it was part of the OTP Group). In particular, the net profit of OTP-Finance for 2022 amounted to 3.66 billion rubles, almost 30 times higher than the result of OTP-Bank. Both systemically important banks, such as Alfa-bank, Sovcombank, Rosbank (see “Kommersant” dated January 9), as well as smaller credit organizations – Uralsib, HKF-bank, Expobank, Sinara, Post-bank, etc.

In general, Dmitry Monastyrshin emphasizes, the microcredit segment “is associated with increased credit risks and high unit costs for customer service.” According to the Central Bank, in general, the share of microloans with a delay of more than 90 days in 2022 was 35%. In the portfolio of mortgage and standard consumer loans, there were much fewer problem loans, only about 5%.

Julia Poslavskaya, Olga Sherunkova