Regular version of site
Skip to content
Banks Expect Corporate Loan Portfolio to Grow with No Decline in Quality – Bank Lending Survey

Banks Expect Corporate Loan Portfolio to Grow with No Decline in Quality – Bank Lending Survey

The banks improved their outlook on lending prospects: the share of respondents anticipating an increase in business lending returned to the pre-war level. Over the past three quarters, the banks' assessments of lending standards, demand, loan application approvals, and other lending indicators have been improving. This is according to the quarterly Bank Lending Survey.

Demand for corporate loans in Q1 was underpinned by the need for working capital, but was restrained by interest rate changes. In Q2, the banks expect an increase in the demand for all types of corporate loans, and especially for SME loans and short-term and hryvnia loans.

In Q2, respondents are also forecasting an increase in the demand for retail loans, and most of all, for mortgages. Retail demand for mortgages has been growing for the second quarter running, fueled by an improvement in consumer sentiment and the growth in household savings. Meanwhile, restrained expectations about the development of the real estate market are slowing the revival of mortgage demand.

The banks do not expect corporate loan quality to worsen over the next 12 months, but they think that retail loan quality will slightly deteriorate.

In Q1, the banks tightened their corporate lending standards. The standards tightened the most for long-term loans and FX loans. In Q2, respondents forecast that corporate lending standards will tighten further, especially for large companies and long-term loans. At the same time, financial institutions plan to slightly loosen lending standards for SMEs.

For the first time since Q4 2021, the banks have relaxed their retail loan standards, primarily for consumer loans. This easing is driven by an improved business outlook, more upbeat exchange rate expectations, and households’ increased solvency. Mortgage standards eased thanks to increased competition between the banks, and lower inflation expectations. In the next quarter, respondents plan to relax lending standards for consumer loans and tighten standards for mortgages.

In Q1, respondents highlighted the growth in all types of risk, except for liquidity risk. This risk moderated for the second straight quarter. In Q2, the banks expect all types of risk to intensify, without exception.

For reference

This Bank Funding Survey was conducted from 17 March to 7 April 2023 among bank liability managers. The answers were provided by 26 respondents that jointly accounted for 96% of the banking system’s total assets. The survey’s results reflect the views of respondents and are not assessments or forecasts by the NBU.

The next Bank Lending Survey, covering expectations for Q3, is scheduled for release in July 2023.


Subscribe for notifications

Subscribe to news alerts