Banks Expect Growth Of Corporate Credit Portfolio Without Deterioration Of Its Quality - NBU Survey

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.

This is evidenced by the results of a quarterly survey of banks on lending conditions, Ukrainian News Agency reports.

Banks' assessments of credit standards, demand, approval of loan applications and other lending indicators have been improving over the past three quarters. The demand for corporate loans in the first quarter was strengthened by the need for working capital, but the change in interest rates restrained it.

In the second 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 second 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 a deterioration in the quality of corporate loans over the next 12 months, but the quality will deteriorate slightly for households.

In the first quarter, banks strengthened corporate lending standards.

Most of them are for long-term and currency loans.

In the second 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 fourth 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 have eased due to increased bank competition and lower inflation expectations.

In the next quarter, the respondents plan to relax credit standards for consumer loans, and for mortgages - to strengthen them.

In the first 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 second quarter, banks expect strengthening of all types of risks without exception.

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.

As Ukrainian News Agency earlier reported, in February 2023, banks reduced mortgage lending by almost 3 times and issued 126 mortgage loans for a total amount of UAH 169.8 million.