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Trends in lending, November 2016

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In September 2016, the annual growth rate of the total corporate lending of credit institutions was 1.8 per cent. After adjustment for the portfolio separation implemented within the framework of the resolution of MKB Bank, the growth rate amounted to 3.4 per cent. It was mainly transactions that contributed to the annual expansion of lending in the third quarter, as disbursements exceeded repayments by HUF 98 billion. This expansion primarily reflected the increase in HUF-denominated loans. On a transaction basis, SME loans increased by 6 per cent in an annual comparison, with the Funding for Growth Scheme contributing substantially to this development. The outstanding loans of the self-employed showed dynamic expansion during the quarter, partly due to the Funding for Growth Scheme and loans related to state land sales. The annual growth rate of the outstanding loans of the SME sector including the self-employed came to 7.3 per cent in the third quarter of 2016.

According to the banks’ responses to the Lending Survey, credit conditions for corporations continued to ease during the quarter, which was justified by the favourable economic prospects and ample liquidity, in addition to increasing competition. Similarly to the previous quarters, easing was primarily seen in the relaxation of price conditions. During the quarter, the banks registered a rise in demand for long-term loans in particular, which they expect to continue for the next six months as well. The average spread of small-amount HUF loans typically taken out by SMEs decreased somewhat during the quarter.

The credit institution sector’s household loan portfolio increased by HUF 37 billion as a result of loan transactions. Since the end of 2009, this was the first time that we observed an increase in the loan portfolio on a quarterly basis. However, the expansion of household loans outstanding is mainly affected by growth in loans granted to self-employers. Looking at the past one year as a whole, the loan portfolio decreased by 2.5 per cent at an annual level. The volume of new loan contracts increased by 43 per cent in an annual comparison and as part of this, housing loan output increased by 48 per cent over the past one year.

Based on the bank’s responses in the Lending Survey, housing loan conditions did not change considerably while consumer loan conditions eased during the quarter. The majority of banks emphasised market competition as a factor contributing to this easing and have also eased the spreads applied on the loans. Looking forward, the banks have indicated similar trends for the next 6 months as well. Banks taking part in the survey observed a continuing expansion of loan demand, but looking forward, only a smaller proportion of banks expect a further recovery. The Home Purchase Subsidy Scheme for families continues to support loan demand. Nevertheless, on the whole the programme’s impact on the construction of new homes is still muted since only one third of the concluded subsidy contracts were used for that purpose. The average APR on new housing loans remained unchanged as a result of the composition effect, while the average interest rate spread increased during the period under review, owing to the increased financing of riskier customers.

Based on the Financial Conditions Index, which summarises lending developments in the corporate and household segments, the banking sector had a nearly neutral impact on the annual growth of the real economy through its lending activity.