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Lending Survey Shows that Banks Expect Rise in Corporate Loan Portfolio despite War

Lending Survey Shows that Banks Expect Rise in Corporate Loan Portfolio despite War

In Q1, the banks expressed cardinally different sentiments regarding lending dynamics compared to previous surveys – respondents reported a slump in demand for corporate and retail loans, a record-high tightening of lending standards, and the lowest ever loan application approval rate. Apart from the SME segment, the banks do not expect a revival in demand for loans, while also expecting a further increase in all risks.

Loan demand eased as lending standards rose to a new high

In January – March 2022, borrowers’ interest in corporate loans declined markedly, with interest in long-term and FX loans and loans to SMEs waning most of all. That said, demand was in part fueled by the need for working capital, debt restructuring and internal financing.

Most banks said they had significantly tightened their corporate lending standards. For the most part, these were standards for long-term and FX loans, and loans to large companies.

Household demand for loans declined sharply due to decreased spending on durable goods and savings. Demand for mortgages reached an all-time low, dragged down by worsening prospects for the real estate market.

Household lending standards, mainly mortgage lending ones, also tightened.

Q1 2022 saw an increase in all types of risks, with credit and operational risks rising most of all.

The banks were guarded about lending prospects

For the next 12 months, 46% of respondents predicted an increase in corporate lending. Conversely, the majority of those surveyed expected a drop in retail lending. The banks said they expected the quality of the loan portfolio to deteriorate in both segments.

Respondents also said that all types of risks would continue to increase in the coming three months.

For reference

The NBU publishes the Bank Lending Survey on a quarterly basis. The purpose of the survey is to deepen the understanding of credit market conditions and trends by the NBU and banking sector participants. 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.

Credit managers from 28 banks that jointly account for 94% of the total assets of Ukraine’s banking system participated in the survey, which was conducted from 18 March through 8 April 2022. The survey’s findings are based on the views of respondents and do not necessarily reflect NBU assessments or forecasts.

The NBU highly appreciates the banks’ participation in the survey under conditions of martial law.


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