Banks have improved their expectations regarding lending prospects: the share of respondents expecting an increase in business lending volumes has returned to the pre-war level. Banks’ assessments of credit standards, demand, approval of loan applications and other lending indicators have been improving over the past three quarters. This is evidenced by the results of a quarterly survey of banks on lending conditions.
The demand for corporate loans in the 1st quarter was strengthened by the need for working capital, but the change in interest rates restrained it. In the II quarter, banks expect an increase in demand for all types of business loans. Most of them are for loans to small and medium-sized businesses, short-term and hryvnia loans.
Respondents forecast an increase in demand for retail loans in the II quarter as well. Most of it is for a mortgage. Household demand for mortgages continues to grow for the second quarter in a row thanks to improved consumer sentiment and rising savings. At the same time, the revival of demand is slowing down the restrained expectations regarding the development of the real estate market.
Banks do not expect the quality of corporate loans to deteriorate over the next 12 months, but for households, the quality will deteriorate somewhat.
In the first quarter, banks strengthened corporate lending standards. Most of them are for long-term and currency loans. In the II quarter, further strengthening of standards is predicted. To a greater extent – for large enterprises and long-term loans. At the same time, financial institutions are planning to slightly loosen credit standards for SMEs.
For the first time since the IV quarter of 2021, banks eased the standards of loans to the population. To a greater extent – for consumer loans. This was facilitated by improved expectations of economic activity, better exchange rate expectations and an increase in the solvency of the population. Mortgage standards eased due to increased bank competition and lower inflationary expectations. In the next quarter, the respondents plan to soften credit standards for consumer loans, and for mortgages – to strengthen them.
In the 1st quarter, respondents noted the growth of all types of risks, except for liquidity. Liquidity risk decreased for the second quarter in a row. In the II quarter, banks expect strengthening of all types of risks without exception.
For reference
The “Survey on Bank Lending Conditions” was conducted from March 17 to April 7, 2023 among bank credit managers. Answers were provided by 26 financial institutions, whose share in the total assets of the banking system is 96%. The results of the survey reflect the opinion of the respondents and are not estimates or forecasts of the National Bank.
The next survey on bank lending conditions in relation to expectations for the 3rd quarter will be published in July 2023.
