Before September 2008, the twin pillars for consumer finance in Russia were low market penetration relative to developed markets and ample wholesale funding. Retail loan growth of at least 70% per year drowned out other considerations. The funding dried up after the fall of Lehman Brothers, and a sharp (though temporary) slide in oil prices saw gross domestic product (GDP) decrease by almost 8% in 2009. But that did not, in theory, change the economic fundamentals of the Russian retail banking catch-up story.
In practice, however, the market has changed and the banks are changing with it. First, credit risk has asserted itself, especially on loans in the 2007 and early 2008 vintage. The 3% to 4% non-performing loan (NPL) rates of the boom years, healthy even compared to the western European consumer finance industry, have jumped into double figures.
