The Magyar Nemzeti Bank launched it questionnaire-based survey in the spring of 2003 with the objective of gaining a deeper insight into Hungarian commercial banks’ lending practices. The survey, conducted on a quarterly basis, presents senior loan officers’ assessment over the loan market. The latest published survey is based on questionnaires returned by lenders in July 2010, and presents their answers to retrospective questions relating to 2010 Q2 and as well as to forward-looking questions asking for their expectations for the next six months.
In the household segment banks reported to have tightened their conditions on the minimum required credit score and on the maximum payment-to-income ratio level, in particular in relation to foreign currency-denominated home equity and mortgage loans. Similarly to the first quarter, in the second quarter of 2010 the banks perceived increased demand for forint-denominated housing loans.
According to the survey, in respect of corporate loans the tightening cycle witnessed since 2007 has ended, but the responses provided by the banks suggest that the considerably tighter credit conditions currently applied may remain in place over a longer period. In parallel with this, banks believe that the economic outlook, customer creditworthiness and their own risk tolerance do not justify any further tightening measures or substantial loosening in credit conditions.
In addition to lending activity, we also closely examined the loan restructuring in the outstanding portfolio. The ratio of restructured loans to the outstanding increased further in the past quarter, increasing from 3.5 per cent to 4.4 per cent in the corporate segment, and from 5.2 per cent to 6.1 per cent the household segment. Furthermore, the number of unsuccessful loan restructuring attempts increased considerably as well: based on banks’ responses, the ratio of delinquent restructured loans in the household segment increased from 20 per cent in the first quarter to 25 per cent, from 3 per cent to 6 per cent in relation to large corporations and from 9 per cent to 18 per cent in the small and medium-sized enterprise segment in the second quarter. The increase is attributed to the fact that with time, the grace periods provided in the framework of restructuring expire, which – for lack of substantial improvement of the macroeconomic environment – leads to deterioration in the portfolio quality of restructured loans.
The full survey is accessible on the MNB’s website in the ‘Financial Stability’ section under ‘Lending Survey’ (http://english.mnb.hu/engine.aspx?page=hitelezesi_felmeres).
MAGYAR NEMZETI BANK