The first quarter of 2018 saw further recovery of corporate and retail lending in Russia, which also spread into higher-risk segments, the Bank of Russia announced on May 25, 2018. Improved banking performance and higher economic activity drove the lending revival.

Key rate cuts in February and March 2018 had an impact on loan and deposit rates, with rates on short-term loans showing a faster decline than those on long-term loans.

The fiscal position of credit institutions improved as a result of stable net interest income and shrinking loan loss provisioning. The banks abstained from easing non-price lending conditions, making lending terms largely neutral for all categories of borrowers.

The structural liquidity surplus remained virtually unchanged in April. As of the end of the month, the inflow of funds to the banking sector intended for bankruptcy prevention of certain credit institutions offset the outflow of liquidity that resulted from increased cash in circulation. The spread between short-term interbank lending rates and the Bank of Russia key rate widened at the end of the averaging period amid the seasonal decline in demand for correspondent accounts.

The outflow of customers’ foreign-currency-denominated deposits slightly exacerbated forex liquidity positions.

Market participants expected the Bank of Russia to keep the key rate unchanged as early as in the beginning of April. As the sanctions expanded and the ruble depreciated, individual market indicators started to reflect the expected rate increase.

Following the local volatility surge in early April, the Russian financial market stabilized in the second half of the month thanks to, among other things, internal investors’ purchases.