Decomposition of Corporate Credit Growth Using Granular Data

Applying a new method of decomposition of corporate credit growth, we estimated what part of credit expansion in Russia in 2018–2021 was accounted for by companies that had experience in credit borrowing in the past, and what part was due to newcomers to the corporate bank loan market. In absolute terms, the share of the loan portfolio attributable to companies that are new to the credit market (the extensive component of growth) is small. A fact that is not obvious at first glance, which we confirm in the course of the study, is that their contribution to fluctuations in the growth rates of credit aggregates, on the contrary, is large. The fact is that companies with existing credit relationships (the intensive component of growth) borrow and repay comparable amounts. Moreover, both the same borrower and different borrowing companies can borrow and repay - we draw a conclusion about their net activity. What unites them and allows us to consider such borrowers on a net basis is the presence of bank loans in the past (based on this fact, we can talk about such a set of borrowers as an intensive component of the growth of corporate bank loans). Thus, the net contribution of the intensive component to credit expansion is small. During the acute phase of the pandemic (from June 2020 to May 2021), the role of lending on preferential terms increased noticeably and then decreased. For companies new to the lending market from affected industries (according to the list of the Russian Government), this growth was especially noticeable. This corresponds with other results: the massive inflow of borrowers at the beginning of the pandemic was sporadic and tightly linked to the state support measures. In this regard, the lower default rates of loans issued with the start of state support programs (between June and September 2020) probably do not imply better quality of borrowers, but reflect the features of the subsidised loans. Within the framework of already existing credit relations (the intensive component of growth), the contribution of preferential lending to the growth of corporate credit was relatively stable until July 2021, after which the contribution of the non-preferential component began to grow rapidly. An increase in the share of inactive borrowers, i.e., those who have open but unused credit lines starting from April 2021. Potentially, this type of borrowers may quickly increase their borrowings via open credit lines under adverse economic conditions. Thus, entail additional risks to banks. In this regard, we suggest the close monitoring of open and used credit lines. However, actual utilisation of credit lines could be bounded by terms of credit agreement, revaluation of collateral, and could led to smaller volumes of funds available during adverse economic conditions.