The volume of both corporate and retail loans will continue to grow in the next four quarters, according to the quarterly Bank Lending Survey.
Financial institutions continue to expect a deterioration in the quality of the corporate loan portfolio, but the share of respondents with negative expectations has been gradually shrinking since the onset of the full-scale war. According to respondents, the quality of the retail portfolio will not change.
Demand for corporate loans increased slightly in Q2, primarily for hryvnia loans for small and medium-sized businesses: the demand is being driven by the need for working capital and capital investments. The banks are projecting an increase in demand for corporate loans in Q3.
Demand for mortgages has grown for the third straight quarter, while that for consumer loans, for the first time since Q4 2021. Lower interest rates is the major driver of the demand for retail loans. In Q3, the banks continue to expect an increase in households’ demand for loans.
Corporate lending standards tightened slightly in Q2. The standards tightened the most for long-term loans and FX loans. In Q3, in a first since russia launched its full-scale invasion of Ukraine, the banks have been planning to ease corporate lending standards for SMEs and short-term and hryvnia loans. Meanwhile, the financial institutions expect a further tightening of lending standards for long-term and FX loans.
For the first time since the outbreak of the full-scale war, the survey recorded an increase in the number of corporate loan application approvals. For loans to large companies, however, this indicator will continue to decrease.
The financial institutions have eased their retail lending standards for two quarters running and plan to relax their approval requirements for both mortgages and consumer loans in Q3.
The number of approved applications for public loans continues to grow.
Respondents reported an increase in credit risk and expect it to rise Q3.
The Bank Lending Survey was carried out from 13 June through 7 July 2023 among bank loan managers. The answers were provided by 26 financial institutions that jointly hold 96% of the banking system’s total assets. The survey’s results reflect the views of respondents and do not necessarily reflect the assessments or forecasts made by the NBU.
The next Bank Lending Survey, featuring expectations for Q4, will be published in October 2023.