Bank lending to SMEs below undertakings, but stock still rising



Banks that undertook to increase their lending to SMEs by HUF 195 billion in the spring are estimated to have done so by only HUF 110 bln this year, the National Bank of Hungary (MNB) projected in its Financial Stability Report published yesterday.

Overall bank lending to SMEs still accelerated, however, and is rising as targeted at a rate of more than 5%, the MNB reported.

A total of 17 banks won a combined HUF 779.5 bln of interest-rate swaps conditional on lending activity (LIRS) at five MNB tenders, which was conditional on raising SME lending stock, excluding non-performing loans, by at least one-quarter of the allocated swap volume annually this year and in the following three years.

Taking into account seasonality, ten of the 17 banks had met their pro-rata annual commitments by the end of June, although the SME lending stock actually fell at five banks, the report said.

The HUF 195 bln in new SME credit commitments the 17 banks had undertaken would be equal to 6% growth in the SME lending stock, the MNB said. The growth of lending had still entered the 5-10% rate targeted by the MNB, including outlays in the last phase of the central bank’s outgoing Funding for Growth Scheme (FGS) and the lending of banks that did not participate in the LIRS tenders, the MNB said.

The national bank expects SME lending to continue to grow even after FGS is phased out. It noted, however, that maintaining SME credit growth would require the strengthening of the various guarantee institutions. Eximbank and European Union financing to SMEs is also supporting lending.

On a transactional basis, banksʼ SME lending stock was up 5.9% year-on-year in Q2 this year, and has been growing at rates in excess of 5% in the previous two quarters.

Meanwhile, the corporate lending stock of domestic financial intermediaries rose 2% year-on-year in the second quarter. Except for a part of 2014, the corporate lending stock has dropped every quarter since Q3 2009.

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