In Q4, banks reaffirmed the positive sentiment they expressed in previous surveys regarding lending dynamics: respondents pointed to ongoing increases in the demand for retail loans and the record growth in corporate loan demand, and reiterated their expectations that the demand for hryvnia loans, SME loans, and mortgages would continue to rebound.
Loan demand rising as lending standards ease significantly
Demand for corporate loans grew at a record pace in October–December 2021, primarily for short-term, hryvnia-denominated, and SME loans. The surge in the demand was mainly driven by companies ramping up working capital and, to some extent, capital investment. As before, demand for SME loans was also fueled by low interest rates.
Corporate credit standards eased more significantly than in the past, while loan application approvals grew at the highest pace on record, banks pointed out.
Demand for retail loans has been rising for six quarters running. Improved consumer sentiment and higher spending on durable goods contributed to the revival in consumer loan demand. Mortgages were fueled by lower interest rates. Banks have been easing their retail lending standards for five straight quarters. Households’ total debt burden remains below average.
FX and credit risks increased, while interest rate risk declined in Q4, respondents said.
Banks upbeat about lending prospects
In the next 12 months, 92% of respondents predicted an increase in the retail loan portfolio, while 79% of them, in the corporate loan portfolio. Banks said they were expecting the quality of the retail loan portfolio to improve in both segments.
While not planning to change the overall credit standards for corporate clients in Q1, banks expected to ease their mortgage and consumer loan requirements for households, respondents said as they answered the survey questions.
Banks project that credit, FX, and liquidity risks will rise and that interest rate risk will continue to fall in the next three months.
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.
The latest survey of the credit managers of 24 banks was conducted between 17 December 2021 and 11 January 2022. These banks accounted for 89% 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.