Russian Credit Delinquencies Continuing to Rise

Russian borrowers’ delinquent credit repayments rose slightly in April 2013, continuing a steady climb that started more than a year ago, according to predictive analytics group FICO and Russia’s National Bureau of Credit Histories (NBKI).

The country’s FICO credit health index (CHI) dropped one point from the first quarter of 2013, to 108 points. The 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. Since January 2012, when just 7.05% of Russian credit accounts were delinquent, the country’s credit health has worsened by seven points, representing a 2% increase in delinquencies.

All regions within Russia have shown a continued quarter-on-quarter drop in credit health since January last year, with the exception of Centralnyi which remained constant in Q412. So far in 2013, the Severo-Kavkazskii region has shown the largest fall (five points) in borrowers’ credit performance when compared to the prior quarter, with Sibirskii, the third largest region in the country, closely following it with a four-point drop.

“The decline of the CRI is the result of the intensive growth in the highest-risk sectors of the credit market, unsecured consumer loans and credit cards, and the rise in delinquencies for these products,” said Alexander Vikulin, chief executive officer (CEO) of NBKI.

“For unsecured loans, delinquencies rose in the first quarter from 10.3% to 11.5%, while credit card delinquencies rose from 8.2% to 9.1%. Delinquent payments on mortgages and auto loans are low and falling, which has caused a new low in unrecoverable debt. In general, Russian banks manage their risks well even when consumers’ payment discipline drops.”

“While this quarter’s FICO CHI shows only a small increase in delinquency, the overall trend suggests that Russians are finding it harder to pay off unsecured loans and credit card balances,” said Evgeni Shtemanetyan, who directs FICO’s operations in Russia. “Therefore it’s especially important for banks to closely monitor borrowers’ repayment behaviour to ensure their strategies are still in line with desired business objectives.”

FICO Russia Credit Health Index Apr2013

FICO and NBKI share this data with Russian lenders to improve their understanding of the market, and help them safely extend credit to consumers. Over the last year, the number of consumers in the NBKI database grew by 28%, to more than 60 million.

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