Increasingly uncertain economic environment triggers a slowdown in lending and greater prudence

Budapest, 10 March 2023 — Credit institutions’ loans outstanding to non-financial corporations grew by 14 per cent in 2022, primarily supported by the credit transactions of large corporations. In the second half of the year, annual growth in loans to households slowed to a single-digit rate, with stronger repayment activity and declining new disbursements as contributing factors. The volume of loan contracts fell short of the year-on-year disbursement in both the corporate and household sectors, with the more uncertain macroeconomic environment playing a significant role, in addition to the base effect. Based on the responses to the Lending Survey, both borrowers and banks grew more cautious in the credit market in 2022 Q4, which may result in more moderate lending in 2023 H1 as well.

In 2022 Q4, the outstanding borrowing of non-financial corporations from banks grew by HUF 311 billion, resulting in a 14 per cent increase for the year as a whole. In 2022, large corporate loan transactions supported credit dynamics to an increasing degree. Based on preliminary data, loans to the micro, small and medium-sized enterprise segment expanded by 13 per cent year on year, with significant continued support from the Széchenyi Card Programme (SCP). In 2022, credit institutions’ total outstanding loan and bond portfolio vis-a-vis non-financial corporations grew by HUF 1,672 billion due to transactions, resulting in annual growth of 15 per cent. In the fourth quarter, new disbursements in the corporate segment overall fell short slightly of the year-on-year figure, dropping by 14 per cent, while a significant decline of 38 per cent was recorded in the SME segment. The ratio of market-based loans within new loans fell from 84 per cent in the previous quarter to 73 per cent, partly due to stronger demand for SCP MAX. The average interest rate on market-based corporate loans was generally in line with the rise in the interest rate environment during the quarter.

Based on banks’ responses to the Lending Survey, in 2022 Q4 conditions of access to credit generally tightened for corporations. A pick-up in demand for foreign currency loans as well as for short-term loans was seen in this period. Looking ahead, roughly one-third of the banks plan to tighten standards in 2023 H1, and in parallel with this they envisage a fall in demand for forint and long-term loans, and a further increase in demand for foreign currency and short-term loans. According to the Bank Sentiment Survey, 47 and 39 per cent of the responding institutions are planning to increase their total corporate loans and SME loans outstanding, respectively, in 2023 H1, which implies a more moderate level of risk appetite.

As a combined result of disbursements and repayments, the credit institution sector’s outstanding lending to households rose by HUF 101 billion in 2022 Q4, reducing the annual growth rate to 6.3 per cent. The gradual decline in credit dynamics is attributable, in addition to the high base, to the prepayment and repayment activity exceeding the level observed in previous periods as well as to the sharp fall in new loans in the rising interest rate environment. The volume of new retail loans in 2022 Q4 dropped 34 per cent in year-on-year terms, with the largest fall seen in the volume of housing loans, which was mainly due to the high base resulting from the launch of the FGS Green Home Programme (GHP), the rising interest rate environment and lower credit demand connected to the decline in housing market transactions. New contracts for prenatal baby support loans exceeded year-on-year disbursements by 7 per cent as a result of demand brought forward due to the phase-out of the scheme – which was originally announced for December – in December banks concluded contracts for more than twice the volume that was typical in previous months, i.e. for HUF 70 billion. With the depletion of GHP, the ratio of loans for new homes fell to 20 per cent from the previous level of 40 to 50 per cent; nevertheless, the ratio of loans with interest rate fixed until maturity is still high within housing loans, at over 40 per cent. In line with banks’ earlier warnings, the average APR and spread on new housing loan contracts rose substantially in the fourth quarter.

Based on responses to the Lending Survey, in 2022 Q4, 17 and 27 per cent of banks further tightened the conditions on housing loans and consumer loans, respectively, which may continue in 2023 Q1 and Q2. In the fourth quarter, almost all banks perceived a fall in credit demand in the household segments; however, looking ahead to 2023 H1, a smaller part of them, roughly 30 per cent, anticipate a further decline in demand. Based on the Bank Sentiment Survey, almost one-fifth of banks are keen on further increasing their loans outstanding both in consumer loans and mortgage loans, while some respondents already plan a reduction in the latter.


Trends in Lending

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:

Lending Survey

Detailed results and the figures of the Bank Sentiment Survey are available on the MNB’s website at the following link:

Bank Sentiment Survey