Tatarstan businesses take out loans worth 1.4 trillion rubles
Tatarstan's big business took out loans of almost 1 trillion rubles in 2023, or by 37% more than in 2022. Lending to small and medium-sized businesses grew less dynamically — by 24.7% compared to last year. At the same time, the average check of loans issued to large businesses has decreased. Entrepreneurs are still borrowing for current activities, not for investment projects. What is forecasted for the credit market in 2024 and whether the expected reduction of the Central Bank's key rate by the market will change the situation — in the review of the analytical service of Realnoe Vremya.
Loan portfolio is growing
Last year, banks issued loans to Tatarstan businesses worth 1.39 trillion rubles. Small and medium-sized businesses registered in the republic received loans worth 478.3 billion rubles, which is by 24.7% more, or by 94.7 billion rubles, than in 2022 (383.6 billion rubles), the National Bank of Tatarstan told Realnoe Vremya. Banks have provided loans worth 920.6 billion rubles to large enterprises registered in the region. This is an increase of 37%, or 248.5 billion rubles, compared to 2022.
The size of the loan portfolio of SMEs in Tatarstan, according to the National Bank of the Republic of Tatarstan, reached 304.1 billion rubles on January 1, 2024, which is by 20.6%, or 51.9 billion rubles, higher than in 2023 (in 2022 — 252.2 billion rubles). The loan portfolio of large enterprises amounted to 664.4 billion rubles as of January 1, 2024 — by 42.8%, or 199.1 billion rubles, more than in 2023 (in 2022 — 465.4 billion rubles).
“During 2023, the loan portfolio of corporate clients of Rosbank SMEs in the Republic of Tatarstan demonstrated steady growth. Over the year, the portfolio has grown by more than 2 times, exceeding the growth rate for 2022," said Sergey Pankovets, the director of Corporate Client Relations at Rosbank in the Republic of Tatarstan.
Among the main drivers of corporate loan portfolio growth in the SME segment, the banker highlighted the preservation, and often an increase in the need for loans from existing Rosbank customers, as well as an active increase in the bank's customer base in the region. For many new customers, lending, he said, was a locomotive product. In the segment of large corporate business, growth indicators in 2023 were more restrained, and the lending situation was more volatile.
The need for business loans was influenced by the general market situation, currency exchange rates, and the dynamics of budget expenditures. Nevertheless, the growth of average corporate loan portfolio amounted to more than 20% in 2023 in Tatarstan compared to 2022, Pankovets noted.
The expected reduction in the key rate in 2024 may give additional impetus to credit processes, but it is unlikely to radically change the trends. With high interest rates on loans, the pace of investment lending may slow down. However, the companies continue to carry out their current activities, and, most likely, working capital lending will continue to develop dynamically.
Central Bank's rate will continue to put pressure on the lending market
“Of course, the high rate of the Bank of Russia leads to an increase in the cost of loans — banks cannot attract inexpensive funding and provide borrowers with loans at more favourable rates. When the availability of borrowed funds decreases, businesses have to be more careful with expenses and optimise their processes. The Central Bank's rate will continue to put pressure on the lending market in 2024, as the regulator has repeatedly noted that it will not rush to reduce it," said Roman Filimonov, the head of Corporate Sales at Svoi Bank JSC (IDF Eurasia Group).
Among the alternative financing channels, the expert names investors and government support measures — grants, subsidies, preferential loans. “But, of course, they cannot completely replace the usual credit mechanism for financing businesses. Therefore, despite the rise of the “key” and the increase in interest rates on credit products, companies have borrowed funds and are still borrowing," says Filimonov. “And here it is important to note the growing interest in collateral lending, which has been observed since the previous year.”
“Credit institutions in general may be cautious in granting loans to SMEs due to insufficient creditworthiness and related risks, and the availability of collateral increases the chances of obtaining a loan," he notes. “We believe that the demand for secured loans will continue in 2024.”
Construction sector made a significant contribution to the growth of lending
In 2023, there was a noticeable increase in lending to all major segments, including legal entities — both large corporate borrowers and small and medium-sized businesses, says Egor Lopatin, the director of the group of ratings of financial institutions at NKR Agency.
This year, we can also expect a noticeable increase in corporate loan portfolios — against the background of an increase in the key rate, interest payments from companies on floating-rate loans will increase, which will lead to an increase in the total loan portfolios of the segment.
Average check of loans issued to large businesses has decreased
“In 2023, the portfolio of large corporate loans in Russia as a whole increased by 27%, the volume of debt of SMEs increased by 31%," commented Ksenia Yakushkina, the director of Bank Ratings at Expert RA agency. “The SME segment has demonstrated high growth rates against the background of the development of new logistics chains with the participation of small companies, as well as access to economic niches previously occupied by large foreign companies.”
According to her, government support programmes have also made a significant contribution to the lending activity of SMEs. However, large businesses also resumed lending activity, which was reflected in the growth of the portfolio against the background of the implementation of deferred demand and relatively low market rates in the first half of last year.
According to Expert RA estimates, in 2024, despite the high key rate, large corporate lending and SME loans will maintain “adequate growth rates” mainly due to government incentives for strategic industries, import and export support and infrastructure projects.
Floating-rate banking products will be popular with borrowers, which will have a positive impact on the cost of debt as the key rate decreases. Nevertheless, the potential for difficulties in the foreign trade chains or secondary sanctions against individual non-resident partners remain the risk factor.
Growth rate of corporate portfolios will slow down in 2024
According to the calculations of Finam FG, based on data from the Central Bank, in Russia as a whole, the issuance of loans to SMEs jumped by 39.6% to 15.9 trillion rubles in 2023, and their debt increased by 29.4% to 12.4 trillion rubles, says Igor Dodonov, analyst at Finam FG. In turn, loans to large Russian companies increased by only 7.3% last year, to 58.5 trillion rubles, and their debt to banks increased by 27%, to 52.4 trillion rubles.
“In my opinion, the more dynamic growth of the SME segment is due to that such companies are more flexible compared to large ones, they try to adapt to new conditions faster and, accordingly, their lending needs may grow faster. Besides, state programmes to support SMEs, including concessional lending, may have played a role," the analyst believes.
The strong tightening of credit conditions and the weakening of economic growth in the country after last year's recovery rebound should significantly slow down the pace of credit growth this year. According to the Central Bank, the growth rate of corporate portfolios of Russian banks will slow down to 6-11% in 2024.