Banks slightly improved their assessments of lending indicators and prospects – Survey on bank lending conditions

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In the 4th quarter, banks slightly improved their estimates of lending indicators: respondents noted the growth of credit demand from businesses and, for the first time in 2022, the recovery of the population’s demand for mortgage loans. At the same time, survey participants noted the tightening of standards for all types of lending and a decrease in the level of approval of applications, with the exception of mortgages. In the future, banks expect moderate growth in demand for business loans and mortgages and predict an increase in all types of risks.

Demand for loans remains restrained, lending standards will continue to tighten

In October – December 2022, corporate borrowers were most interested in hryvnia short-term loans and SMEs. On the other hand, the demand for long-term and currency loans continued to decrease. High interest rates and a lack of capital investment continued to hold back demand for business loans.

For the fourth time in a row, the majority of banks reported tightening of corporate lending standards, mostly for long-term and foreign currency loans.

Negative consumer sentiment restrained the population’s demand for consumer loans. At the same time, for the first time since the beginning of 2022, banks reported the recovery of the population’s demand for mortgage loans, in particular due to more favorable interest rates. Household lending standards strengthened for the fourth quarter in a row.

Survey participants noted a significant increase in interest rate, currency and operational risks in the IV quarter of 2022. Instead, liquidity risk decreased for the first time in four quarters.

Banks forecast multi-directional dynamics of corporate and retail lending, funding growth and increased risks

In the next 12 months, respondents expect a moderate improvement in the dynamics of corporate lending and further reduction of the retail loan portfolio.

Banks are counting on funding growth in the next 12 months, predicting inflows of funds from both the population and businesses.

Most financial institutions expect a deterioration in the quality of the loan portfolio, but the share of such banks has decreased since the last survey.

In the next three months, banks expect all types of risks to increase, but the share of such respondents has slightly decreased.

For reference

The National Bank of Ukraine publishes the “Survey on Bank Lending Conditions” every quarter. The purpose of the survey is to deepen the understanding of the state and trends in the development of the credit market by the National Bank and participants of the banking sector. The report contains generalized assessments and forecasts of changes in the standards and terms of lending to the corporate sector and households, changes in credit demand, etc.

The current survey was conducted from December 16, 2022 to January 12, 2023 among credit managers of 27 banks, whose share in the total assets of the banking system is 97%. The results of the survey reflect the opinion of the respondents and are not estimates or forecasts of the National Bank of Ukraine.

The next survey on bank lending conditions regarding expectations for the II quarter will be published in April 2023

The National Bank of Ukraine highly appreciates the participation of banks in the survey under martial law conditions.

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