Cons and loans: why the Central Bank will tighten corporate lending
The authorities are ready to take additional measures to cool down business lending. Central Bank head Elvira Nabiullina announced this necessity in the State Duma on November 19 - it is necessary to fight inflation. Economy Minister Maxim Reshetnikov agreed with such conclusions: it is necessary to work on optimization of investment programs of natural monopolies. Business has already criticized this approach: entrepreneurs believe that it is impossible to fight price increases if money becomes more expensive. Elvira Nabiullina once again emphasized her tough attitude, saying that the regulator must act decisively so that the "disease" of high inflation "does not become chronic". What signal she gave to the market regarding the December decision of the Central Bank on the key rate - in the material of "Izvestia".
How the Central Bank wants to regulate business lending
The interest of business in lending - one of the factors that still fuels inflation and forces the Central Bank to raise the key rate. This was stated by the head of the regulator Elvira Nabiullina during her speech in the State Duma on Tuesday, November 19. She recalled that only in August, large enterprises borrowed Br1.6 trillion from banks and, according to preliminary data for October, the volume is still the same.
- There may be risks of large companies' borrowing. We will tighten banking regulation, we have announced our action plan - measures that will affect the return of corporate lending to more moderate rates, but, most importantly, will prevent the risk of accumulation of credit indebtedness of large companies," said the Central Bank Chairwoman.
Earlier, the Central Bank reported on the preparation of changes aimed at limiting credit risks of large companies. To improve the stability of the sector will be established surcharges to the risk coefficients for loans to such companies and increased minimum risk coefficient for TAC-banks (because of this, banks will be less profitable to issue such loans). These measures are planned to be implemented in the first half of 2025.
The problem of high creditworthiness of the company at the meeting was also commented on at the government level. Minister of Economic Development Maxim Reshetnikov said at the State Duma meeting that the agency and the regulator agreed to work on optimizing investment programs of natural monopolies. "Izvestia" sent an inquiry to the Ministry of Finance and the Ministry of Energy - both agencies recommended to contact the Central Bank.
In addition, Elvira Nabiullina noted that the profit of enterprises in 2023 exceeded 33 trillion rubles, and by August 2024 amounted to 32 trillion rubles. According to her, this is a good resource for investment and a reserve of financial strength. That is, according to the regulator, business does not need loans now.
Corporate loans are mainly used to refinance old loans by companies, to finance imports and to pay salaries and taxes, emphasized the director of the analytical department of "Digital Broker" Hovhannes Hovhannisyan.
The Central Bank hopes that the tight monetary policy will facilitate the flow of resources to more efficient and less indebted companies, believes Olga Belenkaya, Head of Macroeconomic Analysis at Finam.
- Economic growth will slow down and we can expect the realization of credit risks in the form of an increase in the share of restructurings, defaults and even bankruptcies. But the measures taken by the Central Bank should limit further accumulation of credit risks," the expert explained.
At the same time, such ratios may become a signal to borrowed companies that they should not turn to banks if they do not meet the criteria of a reliable borrower, but look for other sources of financing, according to Natalia Milchakova, a leading analyst at Freedom Finance Global.
Large businesses have alternative means of raising funds in the form of the stock market or issuing bonds, the specialist said. And small and medium-sized enterprises (SMEs) have an opportunity to receive grants, including from local authorities or from the Industry Development Fund of the Ministry of Industry and Trade, she added.
At the same time, business associations criticized the Central Bank's proposal. The growth rate of the corporate loan portfolio can be considered moderate - no more than 10% at a rate of 30% per annum, said Svetlana Tortseva, a member of the Chamber of Commerce and Industry, founder of Criteria Consult. The main risks associated with the growth of large companies' borrowing are: non-fulfillment of development projects, collapse of production, reduction of technological independence, transfer to other owners, bankruptcy.
- Inflation is a steady increase in the general price level for goods and services in the economy. Prices get higher, purchasing power gets lower. How can we fight rising prices if we raise the price of money? - Svetlana Tortseva said.
With high interest rates on loans, the risks for business increase significantly and the question arises as to the very possibility to fulfill certain tasks, including those set by the state, emphasized Alexei Begaev, a member of the council of the Moscow regional branch of "Business Russia".
- If the already difficult credit financing is taken away from business, it will lead to the collapse of small, medium and in some situations even large players, which in turn can lead to a systemic crisis in many industries," he believes.
How the high key rate affects the Russian economy
A slowdown in the growth of corporate lending can be expected in the coming months, Elvira Nabiullina said during a speech in the State Duma. After some time, this will lead to a slowdown in inflation - it is then that we can say that the MPC has reached the required rigidity, which will allow to curb price growth.
The opinion that the key growth only accelerates inflation due to the increase in credit costs is a deep misconception, emphasized the head of the Central Bank. According to her, the overall price growth is much worse for businesses.
- The increase in interest costs is a temporary phenomenon, they will decrease again when inflation is defeated. But the increase in operating costs due to high inflation, alas, will remain forever, - explained the head of the Bank of Russia.
Thetight fiscal policy is now being implemented simultaneously with the stimulating budget policy, emphasized Elvira Nabiullina. The authorities support priority sectors of the Russian economy. She emphasized that in the conditions of record low unemployment of 2.4%, enterprises are more motivated than ever to increase labor productivity - this indicator is growing in most industries.
This creates the possibility that the development of the Russian economy may follow a more optimistic scenario, said Elvira Nabiullina. Strong growth of investments of companies in fixed assets will allow supply to catch up with demand faster - then the regulator will be able to return the rate to the neutral level sooner.
The growth of investments in the development of production was facilitated by state investments and investments of companies in market niches abandoned by foreigners, said Olga Belenkaya, Head of Macroeconomic Analysis at Finam. But it is important to note that the volume of investments in machinery and equipment (which determine the scale of capacity expansion) decreased by 8% in 2022-2023.
One way or another, productivity growth may lead to the fact that by the end of the first half of 2025 the key rate may fall to the level of 16-19%, said Andrei Barkhota. In an optimistic scenario, by the end of the year, it could fall to 10-13%, according to "Tsifra Broker".
However, the risks of price acceleration are still serious, warned Sovcombank chief analyst Mikhail Vasiliev. The rapid growth of salaries against the backdrop of staff shortages, geopolitical situation, ruble exchange rate hikes and high inflation expectations make the market expect further tightening of the MPC.
The experts polled by Izvestia are of the opinion that the Central Bank will raise the key rate at the meeting on December 20. At the same time, five out of nine analysts admit its growth up to 23%. Now the key rate is 21% per annum, at the last meeting in October the regulator raised it by 2 p.p.
The signal of the Central Bank representatives in the State Duma was definitely "hawkish", emphasized Natalia Milchakova. Based on this, a new rate hike is almost inevitable. It is not worth waiting for signals about easing of the CBR until the trend for growth of corporate lending is reversed, concluded Mikhail Zeltser, stock market expert at BKS World of Investments.
