Budapest -24 February 2011. The Magyar Nemzeti Bank has published the results of its latest lending survey conducted in January 2011. According to the survey, banks, in contrast to the previous expectations, tightened credit conditions again in the corporate segment with the result that fewer companies might be able to borrow. Low inclination to take risk has been a major factor contributing to the tightening of credit conditions; hence, weak profitability has emerged as a new factor constraining credit supply. It has to be noted that the liquidity position of the banking sector is adequate, thus it does not obstruct lending.
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 of the loan market. The latest published survey is based on questionnaires completed by lenders in January 2011, and presents their answers to retrospective questions relating to 2010 Q4 as well as to forward-looking questions asking for their expectations for the next six months (2011 H1).
While, according to the two previous surveys, the four-year tightening cycle, in other words, the period of reduced credit supply, seemed to have ended, the latest survey found the opposite. Corporations again found it harder to borrow due to tighter credit conditions, which can be attributed to the decreasing inclination of banks to take risk and the deteriorating competitiveness of the domestic banking sector. The low profitability means that the domestic banking sector is constrained in its ability to raise capital, due to low capital accumulation and difficulty attracting additional capital. Consequently, banks are only to a limited extent able to fund future economic growth via increasing credit availability. In the case of housing loans, banks also tightened credit conditions; in particular, they reported to have raised spreads on riskier loans. Constrained credit supply may cause a delay in the recovery in lending until the second half of 2011 in both the corporate and household segments.
In 2010 Q4, two main tendencies could be observed in household mortgage debt restructurings. First, in the case of outstanding restructured mortgage loans, banks extended the grace periods on a large number of maturing ones, and, second, there was a considerable amount of newly restructured loans. At the end of 2010, restructured loans outstanding reached 9 per cent of the total outstanding mortgage loans. The extension of grace periods and the considerable amount of newly restructured mortgage loans have greatly contributed to the fact that lenders experienced only a slight deterioration in household portfolios in 2010 Q4.