Strong lending growth in every segment in 2017Print
Budapest, 5 March 2018 – Bank lending to the corporate and household sectors expanded in 2017. The growth rate of lending to companies was around 10 per cent and that of lending to the SME sector was around 12 per cent. Banking competition intensified, accompanied by an improvement in economic prospects and an easing of credit terms. Banks surpassed their commitments to boost lending to SMEs made under the Market-Based Lending Scheme, and they have fully maintained them for 2018 as a whole. The stock of lending to households started to increase last year, with annual growth in lending amounting to nearly 3 per cent; and lending for house purchase and consumption also increased significantly. Certified Consumer-Friendly Mortgage products gained ground strongly in the final quarter.
‘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.
The dynamic increase in corporate lending continued in 2017 Q4, thus on a year-on-year basis total corporate loans outstanding rose by 10.4 per cent as result of transactions. In the unprecedented growth since the crisis, large one-off borrowings played a role as well. Lending to the SME sector, including the self-employed, rose by almost 12 per cent. In the fourth quarter, the balance of transactions was similarly high as in the previous quarter, amounting to a total of HUF 184 billion. As a result, increase in total corporate loans outstanding in 2017 was more than twofold as in the previous year. The volume of new loan contracts concluded in 2017 exceeded that recorded a year ago by 30 per cent, and an increase in the average loan amounts has been observed as well.
Based on banks' responses to the Lending Survey, credit conditions eased in both corporate segments in the fourth quarter. Competition in the banking sector further intensified, which was primarily reflected in the falling interest rate spreads. Based on the credit institutions' responses to the Lending Survey there was a pick-up in credit demand in both the large corporate and the SME segments. Looking ahead to the next half-year, banks anticipate these processes will persist, particularly in the case of long-term loans. In 2017, under a general decrease in interest rate spreads, outstanding lending to enterprises rose across the region, though to a lesser extent than recorded in Hungary.
Loans outstanding to households increased 2.7 per cent year on year by the end of 2017. In the period under review, the annual average increase in the volume of new loans was 41 per cent. Within that, new housing loans and personal loans grew by 39 per cent and 47 per cent, respectively.
Based on the Lending Survey responses, banks continued to ease the conditions of consumer loans, and looking ahead they also anticipated further easing both for housing and consumer loans. As perceived by banks, housing credit demand kept growing, which is still helped by the Home Purchase Subsidy Scheme for Families: in the fourth quarter, 16 per cent of the volume of newly issued housing loans was related to the HPS. The average APR of new forint housing loans decreased in all initial interest rate fixation categories, while regarding the spreads, decrease was observed primarily in the case of the loans with an interest rate fixation of 1-5 years. Looking ahead, the Certified Consumer-Friendly Mortgage products may contribute to both the expansion of fixed-rate loans and to the decrease in spreads through the rising competition. In the fourth quarter, 13 per cent of the new housing loans and 23 per cent of the longer fixation period loans were already such certified loans. A more intense run-up has been observed with the Certified Consumer-Friendly Mortgage products in the last quarter: these products reached a 40 per cent share in December 2017.
The MNB summarises the supply conditions of lending developments in the Financial Conditions Index. According to this measure, the cyclical impact of the banking sector's lending activity on economic growth may be deemed neutral. Accordingly, in terms of the annual expansion of the real economy, neither a cycle strengthening, nor a growth-restraining material impact is experienced.
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: