The  results of the Lending Survey conducted by the National Bank of Ukraine  in Q2 2016 suggest an increase  in loans to households  over the next 12 months.

The survey participants – 66 banks that account for 96% of the banking system’s total assets – expect a pick-up in  loans to households but project the stock of corporate loans to decline marginally.  Nearly half of the respondents expect an increase in their corporate loan portfolio, while the other half expect the opposite.  At the same time, the percentage of respondents expecting a revival in lending to households (27% of polled banks) is much higher than that of pessimistic respondents (16% of polled banks).

Most banks have been  expecting  the quality of the loan portfolio to improve for the fourth quarter in a row, primarily in the corporate segment. 52% of the respondents expect better  quality for corporate  loan portfolios (versus 48% in the previous quarter).

In Q2 2016, 53% of polled banks reported stronger demand for loans, especially from corporations (versus 45% in Q1).  The largest increase was  recorded in the demand for loans to SMEs and domestic currency loans. The main reasons behind the demand growth were lower interest rates, a need for debt restructuring, and borrowers’ needs for working capital.

Households’ demand for consumer and mortgage loans  also increased largely due to lower interest rates and rising expenses on long-term use goods.

Banks expect further growth in demand for corporate and household loans in Q3 2016.

In Q2 2016, changes in lending standards followed different patterns. Lending standards for loans to large enterprises and corporate  loans in foreign currency tightened, whereas those for loans to SMEs and corporate loans in domestic currency continued to ease. Lending standards for mortgage loans remained unchanged. Collateral risk and exchange rate expectations were the major factors that prompted banks to tighten lending standards for corporate loans. At the same time, the softening of lending standards for other types of loans can be attributed to expectations of a revival in economic activity, increasing competition and easing inflation pressures. 

Banks forecast lending conditions for domestic currency loans and consumer loans to ease in Q3 2016. However, standards for mortgage loans are expected to remain unchanged.

Banks have remained optimistic about deposit growth for the fifth quarter in a row. The expectations for  corporate deposits inflow have improved markedly. 75% of polled banks forecast growth of corporate deposits over the next 12 months. About a third of polled banks are optimistic about household deposit growth.

For reference

In order to produce the lending survey, the credit managers of 66 banks were polled. Survey answers were provided by 66 banks, accounting for 96% of the banking system’s total assets. The survey results only reflect the opinions of the respondents, and shall not be considered as NBU forecasts or estimates.

*The balance of responses is calculated on the   basis of the respondent’s answers  and their weight in the total sample. A positive balance indicates that respondents generally  expect a change in the index  towards an increase. More detailed information is given in the Annex to the report (page 8).