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Banks Note Sustained Strong Demand for Mortgages, Expect Record Growth in Corporate Loan Demand – Bank Lending Survey

Banks Note Sustained Strong Demand for Mortgages, Expect Record Growth in Corporate Loan Demand – Bank Lending Survey

In Q3, banks reiterated the upbeat sentiment they showed in previous surveys about lending dynamics: respondents maintained record-high expectations of rising demand for corporate loans, and pointed to further growth in loan demand from households.

Loan demand is rising as lending standards ease

In July–September 2021, demand for corporate loans increased again, primarily for SME loans, hryvnia loans, and short-term loans. This growth was primarily driven by lower interest rates and businesses’ capital investment needs and working capital needs. 

Corporate credit standards eased, while loan application approvals grew, banks pointed out.

Demand for retail loans continued to grow. The growth in mortgage demand outpaced that in consumer loans for three quarters running, banks reported. Lending standards eased throughout the year. Respondents rated the household debt burden as the lowest since observations began.

Interest rate risk and credit risk increased, while liquidity risk declined in Q3, respondents said.

Lending outlook is positive

In the next 12 months, 92% of respondents projected an increase in the retail loan portfolio, and 79%, in the corporate loan portfolio. Expectations of rising loan demand from businesses were the highest since 2016.

While not planning to change the overall credit standards for corporate clients in Q4, banks said they would relax their loan requirements for households.

In the next three months, banks are expecting further growth in all types of risk, interest rate risk most of all.

For reference

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 loan demand, and more.

The latest survey of the credit managers of 24 banks was conducted between 17 September and 8 October 2021. These banks account for 89% of the banking system’s total assets. The results of the survey reflect the opinions of respondents and are not the NBU’s estimates or forecasts.

 

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