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Russian Consumers' Credit Health Stable After Two-Year Decline, According to FICO and NBKI Data Print E-mail
Wednesday, 12 February 2014

MOSCOW, Feb. 12, 2014 - FICO, a leading predictive analytics and decision management software company, and the National Bureau of Credit Histories (NBKI), Russia's leading credit bureau, today announced that Russian borrowers' credit repayment delinquencies remained stable from October 2013 to January 2014. This was the first time in 18 months that the country's FICO® Credit Health Index did not decrease from the previous quarter, and indicates that the two-year fall in Russians' credit performance may have stopped.

The FICO Credit Health Index measures Russia's overall credit health, based on the percentage of consumer loans and credit cards reported to NBKI that are delinquent by more than 60 days. In January, 10.7 percent of Russian credit accounts were delinquent, compared with 7.05 percent in January 2012.

"The development of the credit market, especially the growth in unsecured lending that peaked in 2012, contributed to the rapid increase in delinquencies," said Alexander Vikulin, CEO of NBKI. "Over the past year, banks improved their risk management systems, and that had a beneficial impact on the quality of their portfolios. However, we should note that the index of credit health is far from its high, despite the stabilization. The lending market needs to continue making improvements in the careful selection of borrowers and in the implementation of new risk management instruments."

Most regions had the same index as the previous quarter. Only Severo-Kavkazskii and Uralskii had lower indexes than in October, and those reductions were by a mere 1 point. For the fourth quarter in a row, three regions outperformed the country-wide index: Centralnyi (index 106), Privoljskii (index 104) and Severo-Zapadnyi (index 104).

"There is no reason yet for long-term optimism," said Roman Bozhyev, chief portfolio risk manager at Alfa-Bank. "One major factor in halting the fall of the index was the slowdown in lending, caused by the regulator's actions to 'cool down' the retail lending market and stop the quality of borrowers from getting worse. It's too soon to say that the index's fall has been reversed. The fact is that the macroeconomic indicators stop us from being too optimistic. In my opinion, the slowdown in lending and the enhancement of bank portfolios could be temporary. If bank portfolios fail to show brisk growth in 2014, then in 10-12 months a number of good loans will be paid off, and the share of bad debts in bank portfolios will rise, causing the index to drop again."

"Credit expansion has been good for the Russian economy, and banks have been focused on how to control the risk that comes with this expansion," said Evgeni Shtemanetyan, who directs FICO's operations in Russia. "All lenders should maintain their focus so that they can ensure the health and sustainability of their bottom lines."

(Source - FICO Press Release)
 

 

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