CBR confirms profit forecast for Russian banks in 2021, clarifies corporate and mortgage lending forecasts

The Central Bank of Russia (CBR) has confirmed its banking sector profit forecast for 2021 and also clarified its forecasts for growth of corporate lending and mortgages.

"Profit in 9M is 1.9 trillion rubles. For the year as a whole will obviously already have a record - about 2.5 trillion rubles," head of the CBR's bank oversight department Alexander Danilov said at a banking forum hosted by the Russian Union of Industrialists and Entrepreneurs (RSPP).

This fact should be perceived positively as profit is the main source of capital growth for banks, the buffer of which allows to increase lending and cover risks in case of shocks, Danilov said.

According to the CBR's October forecast, lending growth in Russia in 2021 will be 11-15%. The regulator expects corporate lending to grow by 8-12% and retail lending by 21-25% (including a 23-27% increase in mortgage lending).

Danilov said that corporate lending in 2021 will grow by about 12%, while mortgage lending will increase by 25-27%.

"Corporate loans - in 9M we have 9% growth, so we're looking tentatively at 12% in the year. Just for comparison, so that we understand the order of figures: last year we had a crisis year, when companies very much needed credit resources, and for the year we got around 10% growth, and in 2019 it was 6%, that is now we are proceeding, in fact, ahead of 2020 and almost two times ahead of 2019," he said.

He also drew attention to the significant growth in mortgage lending. "In 9M, we state the figure of 21%, as for 2012 as a whole, now there is some slight slowdown, but not a very serious one, which was feared due to change made to the preferential program, there is no excessive decline, and in the year, we will probably see a figure in the area of 25-27%. Again, it will be a record in terms of volume when compared with previous years," Danilov said.

In 2022, mortgage lending growth will slow to about 20%, he said.

The Central Bank remains concerned about the growth of consumer lending, as it is not accompanied by a comparable growth in incomes among the public. "In consumer lending, we've had growth of 16% over 9M. So that you understand, that's a lot, especially in recent months. There was a lot of concern - in recent months, in the neighborhood of 2% a month, that is more than 20% in annual terms, if you annualize this," the executive said.

"The growth itself would not be terrible if it were accompanied by a comparable increase in personal income in nominal terms, or we would see an influx of new borrowers. But, unfortunately, we do not see an influx of new borrowers in this segment, or it is very small, and the growth of nominal income, although it is there, is still outpaced by the growth of lending. And accordingly, the conclusion that follows from this is that the debt load of existing borrowers is increasing, and we are concerned, because it is really an accumulation of potential social risks, and credit risks for banks," Danilov said.