The bad rate of Russian consumer loans has held steady for a year, following a seven-year decline, according to July data from analytic software company FICO and National Bureau of Credit Histories (NBKI), Russia’s leading credit bureau. The FICO® Credit Health Index stood at 90, and has remained within a point or two since July 2015.
“While the steady performance is good, the bad rate we have seen for the last year is the highest since we began the index in 2007,” said Evgeni Shtemanetyan, who directs FICO’s operations in Russia. "This ‘new normal’ reflects the evolution of the Russian credit market, as lenders moved from secured credit to credit cards and other products that carry higher risk.”
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. The July 2016 index of 90 means that 16 percent of Russian credit accounts were delinquent, which is the same as July 2015 but more than twice the level of January 2012, when just 7 percent of accounts were delinquent.
Every one of the eight federal regions is below the index’s benchmark score of 100, established in October 2008, but all have reached a plateau in the past year. Centralnyi, Dalnevostochnyi, Privoljskii, Severo-Zapadnyi, Uralskii and Yujnyi have all experienced a slight increase since last quarter. The average drop in index since January 2012 has been 24 points, with Sibirskii experiencing the largest drop of 33 points and Centralnyi experiencing the smallest drop of 21 points. The regions Centralnyi (index 94), Severo-Zapadnyi (index 95) and Privoljskii (index 92) are the only regions outperforming the overall index. For the current quarter July 2016, Severo-Kavkazskii and Sibirskii continue to have the lowest index value at 85.
“In our opinion, we have already passed the peak of overdue debts’ growth,” said Alexander Vikulin, CEO of NBKI. “Although the level of overdue loans in retail lending is still high, it’s now possible to talk about stabilisation of the situation with bad debts. However, the main risk remains the same — the decline in real incomes. If this trend continues, it will increase the likelihood of default for all retail credit products. Therefore, lenders need to continue to closely monitor market indicators such as the PTI (payment to income), as well as to put the ‘signal’ (online monitoring of the financial behaviour of borrowers) on portfolios of all types of loans, including secured ones.”
FICO and NBKI share this data with Russian lenders to improve their understanding of the credit market, and help them extend credit to consumers safely and profitably. More than half of the top Russian banks use FICO® Scores delivered by NBKI.
National Bureau of Credit Histories (NBKI) is the largest credit bureau in the Russian Federation. It was created in 2005, and counts among its shareholders’ major commercial banks and international companies CRIF and TransUnion. Its main specialty is an integrated centre that stores and processes comprehensive data for creditors’ decision making. As of April 2016, NBKI consolidates data about 77 million borrowers and 184 million loans from 3800 Russian creditors. The bureau provides the Russian market with modern high-tech solutions for risk assessment and control.