The banks expect an increase in demand for all types of corporate and retail loans and growth in their loan portfolios, according to the results of the quarterly Bank Lending Survey.
For eight quarters running, the banks have forecast growth in corporate loans, and for six quarters in a row a rise in retail loans. The larger share of respondents will continue to increase their corporate portfolios, while a slightly smaller share will expand their retail portfolios.
The banks expected a slight deterioration in the quality of retail loans, while the quality of corporate loans will not change.
Demand for loans from SMEs has been growing for five consecutive quarters, driven by capital investment and working capital needs, lower interest rates, and the need to restructure debt.
In Q3, respondents predict an increase in demand for all types of corporate loans, apart from FX loans.
In Q2, households' demand for loans increased due to improved consumer sentiment and better prospects for the real estate market, including low mortgage interest rates.
The banks expected demand for all types of retail loans to rise in Q3.
In Q2, the banks assessed the debt burden of companies as moderate, while households' debt burden was believed to be the lowest ever since the survey began in Q3 2016.
The banks continued to tighten their lending standards for businesses in Q2, but this tightening primarily concerned loans to large companies. Lending standards for SMEs remained unchanged.
In Q3, the banks plan to ease lending standards for SMEs and long-term loans, and tighten these standards for FX loans.
In Q2, the approval rate declined for corporate loans in general, while it remained unchanged for SME loans. When approving loan applications, the banks had more conservative approaches to loan amounts and to collateral requirements for large companies.
The highest ever share of respondents said they had eased lending standards for households. The banks have been easing consumer lending standards for six quarters in a row.
The banks intend to maintain this trend in Q3.
The approval rate for retail loan applications increased as collateral requirements for mortgages were relaxed, loan amounts increased, and interest rates, fees and commissions for consumer loans declined.
All types of risks increased slightly in Q2, according to respondents, while only operational risk increased significantly. The share of respondents reporting an increase in credit risk was the lowest since the beginning of 2021.
In Q3, respondents expected an increase in credit, FX and operational risks.
This Bank Lending Survey was carried out from 17 June through 8 July 2024 among bank loan managers. The answers were provided by 26 financial institutions, which together held 96% of the banking system’s total assets. The survey’s results reflect the views of the respondents and are not assessments or forecasts by the NBU. A bank funding survey with the banks’ expectations for Q4 will be published in October.