Budapest, 21 May 2021 — In the first quarter of 2021, corporate loans outstanding rose by 6 per cent in annual terms. According to preliminary data, the loans outstanding to SMEs grew by 17 per cent during the period. Corporate borrowing was supported significantly by contracts concluded under FGS Go!: almost one-third of total corporate loan disbursements and more than half of loans disbursed to SMEs materialised under the scheme during the quarter. The HUF 213 billion increase in retail loans outstanding in the first quarter resulted in annual credit growth of 13.7 per cent, with substantial contribution by stable disbursements of prenatal baby support loans. The volume of retail loan contracts concluded in the quarter remains below pre-pandemic levels; however, the upward effect of new home subsidies on credit demand, entering into force this year, was already felt in March. According to banks’ expectations, credit demand may pick up both for housing and consumer loans in the second and third quarters of 2021. The moratorium on payments continues to have a significant downward effect on instalments: in February 2021, 50 per cent of eligible retail loans outstanding and 35 per cent of eligible corporate loans outstanding were affected by the payment moratorium.
Despite the adverse economic effects of the second and third waves of the coronavirus pandemic, corporate loans outstanding continued to grow, by roughly HUF 190 billion due to transactions, in the first quarter of 2021. The stock of corporate lending by banks grew by 6 per cent between March 2020 and March 2021. The moratorium on payments, introduced in March 2020, resulted in a fall in principal instalments due, while the central bank and government loan and guarantee schemes, introduced to mitigate the economic effects of coronavirus, had a favourable impact on new loans. In the first quarter, companies concluded new loan contracts roughly in the amount of HUF 855 billion, which exceeded the volume of new loans, extended in the same quarter of 2020, by 28 per cent. According to preliminary data, the loan portfolio of micro, small and medium-sized enterprises rose by 17 per cent between March 2020 and March 2021. Lending to SMEs was also strongly supported by the FGS Go! in the first quarter, under which non-overdraft loan contracts have been concluded in the amount of almost HUF 280 billion, accounting for more than half of all SME loans.
Based on the responses of banks participating in the Lending Survey, apart from the tightening related to commercial property financing attributable to sector-specific reasons, lending conditions have not changed significantly in the corporate segment in the first quarter, while there was a pick-up in demand both for short-term and long-term loans. Looking ahead to the second and third quarters of 2021, banks plan no further tightening in lending conditions in any enterprise size category, and in parallel with this they anticipate a further pick-up in demand.
In the first quarter of 2021, the retail loans outstanding of the credit institution sector grew by HUF 213 billion due to transactions, 60 per cent of which was related to prenatal baby support loans. The annual growth rate of loans outstanding reached 13.7 per cent in March, which continues to be the highest among European Union Member States. The downward effect on instalments of the payment moratorium also supported growth in loans outstanding at the beginning of 2021. According to our estimates, the growth rate decreases to roughly 5 per cent after adjusted for this effect. The volume of new loan contracts in the first quarter fell short by 16 per cent of disbursements in the same period of last year, i.e. the period that had not yet been affected by the adverse effects of pandemic. The decline affected all credit products. However, the lower volume of new contracts in the first two months of the year was followed by a substantial rise in March, which implies growing demand for new home subsidies effective from January: the volume of housing loan contracts in March exceeded the year-on-year volume by 21 per cent. State-subsidised loans continue to have a significant role in retail lending, accounting for one-third of quarterly disbursements. Prenatal baby support loans play a major role in this, the total outstanding volume of which amounted to HUF 1,192 billion in March, already accounting for 14 per cent of the total stock of retail loans.
Citing improving economic and housing market trends, the institutions participating in the Lending Survey eased credit conditions on both housing and consumer loans during the quarter and, looking ahead to the second and third quarters of 2021, some of them plan further easing. Banks anticipate increasing credit demand for both products, which presumably points to the popularity of pre-financing loans for home improvement subsidies available from January.
Based on the 2021 Q1 results of the Bank Sentiment Survey, the banking sector as a whole saw a moderate improvement in economic sentiment in 2020 Q4 and 2021 Q1. The macroeconomic environment, and perceptions of risk appetite and profitability contributed to the worsening in banks’ economic sentiment over the six months. However, the positive effects of increasing market competition, recovering demand and improved access to funding partially offset this. On the other hand, banks expect a major improvement on account of the positive economic outlook looking ahead to the second and third quarters of 2021.
The MNB will publish the next Trends in Lending report in September 2021. The objective of the publication 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:
Detailed results and the figures of the Bank Sentiment Survey are available on the MNB’s website at the following link: