RegionsBalticsRussians’ credit health ends long decline

Russians’ credit health ends long decline

After steadily worsening for seven years, FICO reports that its credit health index for Russia has started to trend upwards.

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.

Related Articles

The Challenge of Integrating Worldwide Subsidiaries into one TMS

Baltics The Challenge of Integrating Worldwide Subsidiaries into one TMS

5m BELLIN
Five measures to protect against ransomware attacks

Baltics Five measures to protect against ransomware attacks

12m Mike Gillespie
Cybercriminals turn their attention to retail

Baltics Cybercriminals turn their attention to retail

12m Graham Buck
Leadership changes pose geopolitical risk, says Marsh

Africa Leadership changes pose geopolitical risk, says Marsh

1y Graham Buck
Is Russia warming to bitcoin?

Baltics Is Russia warming to bitcoin?

1y Graham Buck
Banks accused of handling laundered Russian money

Baltics Banks accused of handling laundered Russian money

1y Graham Buck
Cyber attackers target five Russian banks

Baltics Cyber attackers target five Russian banks

2y Graham Buck
Nordea, DNB to merge Baltic operations

Baltics Nordea, DNB to merge Baltic operations

2y Graham Buck