Banks expect an increase in demand for all types of corporate and retail loans and an increase in the volume of the loan portfolio. This is evidenced by the results of a quarterly survey on the terms of bank lending, the press service of the NBU reports.
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According to the survey, banks expected an increase in the volume of business loans for the eighth quarter in a row, and for the sixth quarter for the population.
The majority of respondents will increase their corporate portfolio, and somewhat fewer will increase their retail portfolio. Financial institutions expect a certain deterioration in the quality of loans to the population, while the quality of business loans, in their opinion, will not change.
Demand for loans from SMEs
Demand for loans from small and medium-sized enterprises (SMEs) has grown for five consecutive quarters, given the need for capital investment and working capital, lower interest rates and the need to restructure debt.
Respondents forecast an increase in demand for all types of corporate loans in Q3, except for loans in foreign currency.
Household demand for loans in Q2 increased due to better consumer sentiment, better prospects for the real estate market, in particular low interest rates on mortgages.
Financial institutions forecast an increase in demand for all types of retail loans in Q3.
Banks assessed the debt burden of enterprises in the second quarter as average, and the indebtedness of the population as the lowest in the entire history of observation since the third quarter of 2016.
Banks further strengthened business lending standards in the second quarter, but this strengthening primarily concerned loans to large enterprises. Standards for SMEs remained the same.
Easing credit standards for SMEs
In the third quarter, banks plan to ease credit standards for SMEs and long-term loans, and tighten them for foreign currency loans.
The approval rate for corporate loans declined in Q2, with the exception of SME loans, where it remained unchanged.
Banks were more conservative in approving applications on loan amounts and, for larger businesses, on collateral requirements.
A record share of respondents reported easing lending standards for retail loans. Consumer lending standards have been easing for six quarters.
Banks plan to continue this trend in Q3.
The approval rate for household loans increased given the relaxation of collateral requirements for mortgages, an increase in the volume of loans, and a decrease in interest rates and fees for consumer loans.
Risk growth
All types of risks increased slightly in the second quarter, according to respondents, while only operational risk increased significantly. The share of respondents who noted an increase in credit risk is the lowest since the beginning of 2021.
A growth in credit, currency, and operational risks is expected in the third quarter, according to the survey results.
Survey
The survey on bank lending terms was conducted from June 17 to July 8, 2024 among bank credit managers. Responses were given by 26 financial institutions, their share in the total volume of assets of the banking system is 96%.
The regulator noted that the survey results reflect the opinion of respondents and are not estimates or forecasts of the National Bank.
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- NBU