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Banks’ Loan Application Approvals Rise Amid Expectations for Further Growth of Corporate and Retail Portfolios – Bank Lending Survey

Banks’ Loan Application Approvals Rise Amid Expectations for Further Growth of Corporate and Retail Portfolios – Bank Lending Survey

The approval rate of banks’ loan applications has increased for all types of corporate loans, most notably for small and medium-sized enterprises. The approval rates for retail loans, mostly mortgage applications, continued to grow.

According to the quarterly Bank Lending Survey, the key indicators have further improved, with most respondents expecting growth in lending to businesses and households during the next 12 months.

Demand for corporate loans continued to recover in Q4 and in 2023 in general. For the first time in the last five quarters, demand from large corporates has grown more significantly than demand for SME loans.

Mortgage demand has declined, breaking the trend of more than a year of growth. This was mostly indicated by large banks. Demand for consumer loans remains unchanged.

Respondents expect a further increase in demand for corporate loans in Q1 2024, primarily for hryvnia-denominated and short-term loans and loans to large companies. Mortgage demand is expected to decrease, while demand for consumer loans will remain flat.

The banks have eased their lending standards for SMEs, while tightening them for businesses in general under pressure from deteriorating expectations for the development of certain industries and enterprises, the exchange rate, and capital needs. In Q1 2024, the banks expect to ease standards for SMEs and further tighten them for FX and long-term loans.

In Q4 2023, for the first time in a year, lending standards for mortgages did not ease, but remained unchanged. At the same time, the financial institutions continued to loosen standards for consumer loans and expect to do so going forward.

At the same time, the banks forecast a deterioration in loan portfolio quality. The respondents also noted that FX, credit, and operational risks increased in Q4 2023, and that the uptrend will continue in the future.

For reference:

Loan managers of banks participated in the Bank Lending Survey, which was held between 15 December 2023 and 12 January 2024. The answers were provided by 26 respondents that jointly accounted for 96% 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.

The next Bank Lending Survey, featuring expectations for Q2 2024, will be published in April 2024.


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