The two-year decline in Russian’s credit health has stabilized. FICO and the National Bureau of Credit Histories (NBKI), Russia’s leading credit bureau, announced new figures showing that Russian borrowers’ credit repayment delinquencies remained stable from October 2013 to January 2014. This was the first time in 18 months that the country’s FICO® Credit Health Index did not decrease from the previous quarter.
This is good news, but one quarter’s results do not make a trend. In January, 10.7 percent of Russian credit accounts were delinquent, compared with 7.05 percent in January 2012. That’s a big bump, due largely to the growth of the credit market and the growth in unsecured lending. As Roman Bozhyev, chief portfolio risk manager at Alfa-Bank, notes in our news release, there is no cause for optimism yet. “One major factor in halting the fall of the index was the slowdown in lending, caused by the regulator’s actions to ‘cool down’ the retail lending market and stop the quality of borrowers from getting worse. It’s too soon to say that the index’s fall has been reversed. If bank portfolios fail to show brisk growth in 2014, then in 10-12 months a number of good loans will be paid off, and the share of bad debts in bank portfolios will rise, causing the index to drop again.”
As we did when the index was falling, FICO urges risk managers to carefully monitor origination practices, manage revolving credit limits carefully, and increase customer education. This is a market where many people have little experience of credit – help them understand what is expected of them as a borrower.