Russians’ credit health ends long decline

Moscow International Business Center

Predictive analytics firm FICO, whose credit health index (CHI) measures delinquent consumer loans and credit cards, reports that Russia’s overall credit health shows signs of improvement after seven years of declines.

Data from the firm and the National Bureau of Credit Histories (NBKI), the Russian Federation’s largest credit bureau, shows 15.5% of Russian credit accounts were delinquent last month against 16.7% in April 2016. FICO’s CHI stood at 91, its highest point since July 2015, when the seven-year decline ended.

“We are cautiously optimistic about this rise in the CHI,” said Evgeni Shtemanetyan, who directs FICO’s operations in Russia. “Consumers’ payments are stabilising, showing that the country overall has a better credit habits and is learning to adjust to new types of credit. However, good customer risk management and collections practices are still very important for Russian lenders.”

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. October’s index of 91 means that 15.5% of Russian credit accounts were delinquent, from 16.7% six months ago, although the bad rate is still more than twice the level of the index’s peak in January 2012, when just 7% of accounts were delinquent.

All eight federal regions have an average CHI below the benchmark of 100, but have stabilised their indices over the past four quarters. Centralnyi, Severo-Kavkazskii and Severo-Zapadnyi have all experienced a slight increase since last quarter.

“The peak of overdue debts occurred in 2015 and early 2016, and after that the situation with ‘bad’ debts has stabilised,” said Alexander Vikulin, chief executive officer (CEO) of NBKI. “However, key risks remain the same – the decline in real incomes.

“If this trend continues, the likelihood of defaults for all retail credit products will only rise. Therefore, lenders need to continue to closely monitor market indicators such as payment to income (PTI), as well as to put portfolios of all types of loans, including secured ones, on the ‘signal’ – online monitoring of the financial behaviour of borrowers.”

FICO and NBKI share the 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.

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