Banks slightly improve their assessments of lending indicators – NBU survey

KYIV. Jan 30 (Interfax-Ukraine) – In Q4 2022, banks slightly improved their assessments of lending indicators: respondents noted an increase in credit demand from businesses and, for the first time in 2022, a resumption of household demand for mortgage loans, according to the National Bank of Ukraine’s (NBU) survey published on Monday.

"In the first quarter, banks plan to further strengthen credit standards in all segments, except for mortgages – easing is expected there. The level of approval of applications for all types of loans, except for mortgages, has decreased. For the first time in 2022, a decrease in liquidity risk was recorded, other risks were growing. Respondents expect all risks to become tougher in the next three months," the NBU said.

According to the survey, banks predict multidirectional dynamics of corporate and retail lending, increased funding and increased risks. In particular, about 46% of respondents expect an increase in the size of their corporate portfolio. At the same time, half of the surveyed banks predict that the retail portfolio will continue to shrink.

It is clarified that in October-December 2022, the interest of corporate borrowers was the highest in hryvnia, short-term loans and from SMEs, while the demand for long-term and foreign currency loans was declining: high interest rates and the lack of capital investment still constrained the demand for business loans.

In addition, most banks reported strengthening corporate lending standards for the fourth time in a row, mostly for long-term and foreign currency loans.

In terms of consumer loans, negative consumer sentiment has held back household demand for them, while household lending standards have also strengthened for the fourth straight quarter. At the same time, for the first time since the beginning of 2022, banks reported a resumption of consumer demand for mortgage loans, including due to more favorable interest rates.

Survey participants noted a significant increase in interest rate, currency and operational risks in the fourth quarter of 2022. At the same time, liquidity risk declined for the first time in four quarters.

Banks are counting on an increase in funding over the next 12 months, predicting an influx of funds from both the population and businesses. Most financial institutions expect deterioration in the quality of the loan portfolio, but the share of such banks has decreased compared to the previous survey. In the next three months, banks expect an increase in all types of risks, but the proportion of such respondents has slightly decreased.