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Banks Boost SME and Household Lending as Stated in Lending Survey

22 January 2018

Press Release

 

In the upcoming 12 months, banks expect an increase in corporate and household lending. The most optimistic expectations were given for SME and consumer lending. This information was released in the Lending Survey published today by the National Bank of Ukraine.

 

The survey was conducted from 20 December 2017 through 10 January 2018, and covered results for Q4 2017 and expectations for Q1 2018 and the following 12 months. A total of 65 managers took part in the survey from banks accounting for 97% of the total banking system’s assets.

 

Over the upcoming 12 months, corporate lending is said to increase. This response was given by 72% of the surveyed banks. Expectations of a corporate lending portfolio increase have continued for five quarters in a row. A total of 67% of the surveyed banks expect a rise in household lending, the biggest figure since the survey was introduced in 2015. Expectations of deposit inflows from households and businesses were optimistic as usual.

 

In Q4 2017, three quarters of respondents maintained the same standards for corporate lending. The SME loan approval rate rose noticeably. According to respondents, a decline in interest rates was the primary driver. Large banks significantly increased the approval rate of household loans, both mortgages and consumer loans. Apart from lower interest rates, this was also due to banks easing their collateral requirements.

 

In Q1 2018, most banks expect to maintain the same or to ease their current lending standards. Some large banks intend to tighten corporate lending standards further, primarily for FX loans.

 

In Q4, business and household demand for loans rose significantly. Demand from SMEs was mostly caused by a decrease in interest rates, while that from big corporations resulted from the need to ramp up their current assets and attract investment. Demand increased for all loan types, especially for short-term and hryvnia loans. Main demand drivers for mortgages and consumer loans were interest rates and improving consumer sentiment. In Q1 2018, 52% of polled banks anticipate an increase in demand for corporate lending, i.e. 33% for mortgages, and 46% for consumer loans.

 

A total of 60% of respondents said that credit risk had increased in Q4 2017. FX and liquidity risks also rose, although to a smaller extent. Interest risk has remained low for four consecutive quarters. Operational risk did not change. In Q1 2018, banks expect an upturn in credit, FX, and operational risks. Furthermore, for the first time since Q3 2015 interest rate risk is expected to rise.

 

More details on the analytical report, questionnaire data and additional information about the survey are available here.

 

The next Lending Survey on lending expectations for Q2 2018 will be published in April 2018.

 

Note: in the Q4 2017 Lending Survey respondents’ replies are given non-weighted, with one bank equaling one response.

 

For reference. The NBU publishes lending surveys on a quarterly basis. These surveys summarize findings of bank surveys of lending conditions in the reporting quarter and lending prospects for the following 12 months.


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Last modification   22.01.2018