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Growth in lending continued in 2017 Q1

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In 2017 Q1, developments in credit institutions’ lending were characterised by improvement. Beside the 4 per cent annual growth in total corporate loans, lending for the SMEs expanded by 8 per cent, while the growth rate was 13 per cent when the self-employed sector is also taken into account. Corporate credit conditions eased only in the small and micro segment in a small extent. Household loans expanded in annual terms, while new lending increased by 1.5 times last year. Pick-up in household lending took place while lending conditions did not change, but credit demand – both for the housing and consumer loan segment – increased.

Budapest, 31 May 2017: ‘Trends in Lending’, a quarterly publication of The Magyar Nemzeti Bank, presents a comprehensive, descriptive analysis of the most important indicators of developments in lending.

In 2017 Q1, corporate lending continued to grow, as the loan portfolio grew by 4 percent year-on-year on a transaction basis. The lending of the narrow SME sector expanded by 8.1 per cent, within the growth range of 5-10 per cent considered desirable by the MNB, while the broad SME sector including the self-employed sector increased by 12.8 per cent year-on-year. Transactional growth in loans to non-financial corporations amounted to a total of HUF 260 billion. In Q1, the total corporate loan portfolio increased by HUF 108 billion. In the past one year, however, market-based HUF loans also expanded significantly, in addition to the loans granted within the framework of the Funding for Growth Scheme.

Loans in the third stage of the FGS amounted to HUF 132 billion in the first quarter, accounting for 18 percent of new corporate disbursements. The third phase of the FGS concluded with 98 per cent utilisation at end-March 2017, but banks’ commitments made under the Market-based Lending Scheme to increase the SME loan portfolio continue to facilitate corporate lending.

Based on the responses to the Lending Survey, banks expect continued expansion in credit demand, both in the long-term and short-term loan markets. Banks primarily eased non-price credit conditions in the case of small and micro enterprises, while the spreads on small-amount forint loans, mainly in demand by this segment, increased – however this could be the result of composition effect. Looking ahead, banks indicate an easing in price conditions, although no further wide-ranging easing is expected in the standards in the coming half year, in spite of the ample liquidity, increasing market competition and improving economic prospects.

Lending growth in the household sector turned into positive, and thus loans outstanding increased by 1.2 per cent in annual terms. The annual value of household loan transactions amounted to HUF 67 billion, with Q1 contributing to this by HUF 4 billion. The value of loans borrowed by the self-employed sector had a major impact in Q1 as well, but even disregarding this, household lending growth has been steadily improving. The annual average increase in the volume of new loans was around 50 per cent. Within that, new housing loans rose by 44 per cent in the past one year.

According to banks’ responses to the Lending Survey, the conditions of both housing and consumer loans remained practically unchanged in the quarter under review. In the case of housing loans no change is expected for the next half year either – though at the time of the survey, final conditions of the certified consumer-friendly housing loans were unknown, and the notification of this may have an easing effect on lending conditions. Against this background, banks continued to perceive a pick-up in credit demand in the case of both products, and looking ahead they expect this trend to continue. The rise in demand is still supported by the Home Purchase Subsidy Scheme for Families (HPS). In Q1, 16 per cent of the new housing loan volume was related to the HPS. Both the average APR and the interest rate spread on new housing loans declined in the period under review, though they remain above the regional average.

Trends in lending

The objective of the publication ‘Trends in Lending’ is to present a detailed picture of the latest trends in lending and to facilitate the appropriate interpretation of these developments. To this end, the report elaborates on the developments in credit aggregates, demand for loans perceived by banks and credit conditions, based on the Lending Survey, and the balance sheet and interest rate statistics of the banking system. Detailed results and the figures of the Lending Survey are available on the MNB’s website at the following link:

Lending survey