Sberbank see personal loans rise for first time in year in March

Russia has passed the bottom of the crisis and is now climbing up the other side to recovery. That is what the annoucement by state-owned retail banking giant Sberbank that it saw personal loans rise for the first time in a year this March means.

Deputy Prime Minister Alexei Kudrin separately that lending in Russia could grow 5%-10% this year, but said this was an optimistic forecast.

The bank's President and CEO German Gref told reporters on Tuesday that the amount of loans was up, but didn't give any details. However, Gref said that the volume of corporate loans had declined, although only "slightly."

The announcement is significant as Russia's economic revival will be driven by a return of consumer demand and multiplied by personal borrowing. The recent crisis didn't hit the man in the street hard. The worst that happened was a 30% devaluation of the ruble against the dollar, but as the ruble had been appreciating strongly for several years prior to the crisis most Russians have long ago swapped their personal savings out of dollars and into ruble.

The crash suffered by over leveraged corporates has not extended far into the population as the Kremlin's fast bail out action managed to stave off any significant bankruptcies. While unemployment has climbed to about 8.4% it was falling again by March. Indeed average disposable incomes actually rose in 2009 by 7%.

The upshot is that the average Russian is actually in a better position to spend than prior to the crisis (and interest rates have come down since) but they aren't because of the fear of worst to come.

As this fear recedes - as it clearly is now - the consumer is expected to go shopping again and this will translate into growth. The increasing good economic news this spending will cause will start a virtuous circle and drive faster-than-expected economic growth in the second half of this year.

Gref also said Sberbank plans to reduce the rates within the coming month or month and a half. He didn't say by how much the rates could be lowered. At present, interest rates on loans in Russia stand at about 15% annually.

All rights reserved by Rossiyskaya Gazeta.