In Q2, the banks had more upbeat sentiment about lending dynamics than in Q1 2021 – respondents reported a further increase in households’ and businesses’ demand for loans, while also upgrading to a record high their expectations of growth in the corporate loan portfolio.
Demand for loans continues to rise, lending conditions are easing, and risks are increasing moderately
In April – June 2021, the banks saw an increase in business loan demand, primarily for SME loans, hryvnia loans, and short-term loans. The recovery in demand was mainly driven by lower interest rates, businesses’ capital investment needs, and working capital needs. The banks have reported an easing of corporate lending standards for three quarters running, attributing this to high liquidity, stronger competition from other banks, and positive expectations about overall economic activity and the development of certain industries, especially among SMEs.
One third of respondents saw an increase in the approval rate of loan applications on the back of lower interest rates, especially for large companies, and an increase in the size of loans.
Over 80% of banks said the overall debt burden was moderate, with the debt burden of large companies being greater than that of SMEs.
Financial institutions expect that next quarter hryvnia lending standards for businesses will ease the most significantly since 2013.
Demand for retail loans has been rising throughout the year. Half of the respondents said that demand for both consumer loans and mortgages was on the rise in Q2.
Lending standards for households have been easing for three quarters in a row. Positive expectations for the real estate market contributed to looser mortgage lending standards. The easing of consumer lending standards was due to upbeat expectations of borrowers’ creditworthiness and overall economic activity, as well as competition with other banks and nonbank financial institutions.
The approval rate for loan applications increased primarily for consumer loan applications. One out of five banks believes that the debt burden of households is low.
Respondents said that liquidity, credit and interest rate risks had risen moderately in Q2.
The banks’ lending outlook remains positive
79% of respondents forecast growth in their retail loan portfolios, and 88% expect an increase in their corporate loan portfolios over the next 12 months. The percentage of banks that expect growth in the corporate loan portfolio is the largest since the survey began.
67% of financial institutions expect funding growth through an increase in both retail and corporate deposits.
The banks expect a further increase in credit risk and a decrease in interest rate and liquidity risks over the next three months.
This survey of the credit managers of 24 banks was conducted between 17 June and 9 July 2021. The surveyed banks accounted for 90% of the banking system’s total assets. The survey’s findings reflect the views of the respondents and do not necessarily reflect assessments or forecasts made by the NBU.
The NBU publishes the Bank Lending Survey on a quarterly basis. The survey aims to help the central bank and other banking sector stakeholders better understand credit market conditions and trends. It provides general assessments and forecasts of changes in lending standards and conditions for the corporate sector and households, fluctuations in lending demand, and more.