In the following 12 months banks are expecting fostered corporate as well as retail lending. The most optimistic expectations concern corporatelending i.e. 76% of surveyed banks anticipate loan portfolio increase and 69% - a hike in retail lending. Such findings were released in the Lending Survey published by the National Bank of Ukraine (NBU).
The credit managers of 64 banks that jointly hold over 98% of total assets in the system took part in the survey from 20 March through 10 April 2018. This survey findings show status of the bank credit market in Q1 2018 and respondents’ expectations for Q2 2018 and the following 12 months.
In January-March, banks were more likely than in the previous quarter to approve loan applications for small and midsize enterprises and consumer loans in response to boosting demand. The positive trend in this sectors corresponded to expectations released in the previous survey.
Lending spike for households and SME in QI was associated with reduced interest rates and extended loan terms. Advancing competition between banks and non-bank institutions, economic growth and declining inflation expectations encouraged banks to scale down requirements to individual borrowers in Q1. At the same time, banks mostly big institutions imposed tighter requirements to collateral under corporate loans and restrictions prescribed in loan agreements, specifically for big companies.
A number of big banks also reported increasing demand for mortgages.
In Q2, banks do not plan to ease lending standards for big companies. However, banks anticipate more lenient terms and conditions for SME, short-term and hryvnia loans. The same goes for consumer lending.
According to 94% of surveyed banks, debt load on SME was estimated as either low or average. Concurrently debt load on business in general remain substantial, heavy debt burden on businesses increased by 7 pp according to 45% of banks. Some big banks also indicated a high debt load on households.
Big banks are expecting reduction of credit, interest rate and FX risks in Q2. In Q1 2018, banks were close to unanimous in their risk assessments. Respondents consider credit, interest rate and FX risks unchanged, despite an anticipated rise. Liquidity risk was a concern primarily for small banks, instead large financial institutions reported no change. Most banks (79%) indicated the same level of operational risk.
Big institutions are counting on a decline in credit, interest rate and FX risks in Q2. Respondents are forecasting no change in liquidity risk and a slight increase in operational risk.
More details on the survey, questionnaire data and additional information about the survey are available here.
The next Lending Survey on lending expectations for Q3 2018 will be published in July 2018.
Note: In the Lending Survey (Q2 2018) respondents’ replies are non-weighted, with one bank equaling one response.
For reference: The NBU publishes the Lending Survey quarterly to summarize findings of bank surveys of lending conditions in the reporting quarter and lending prospects for the following 12 months.