SME lending expands 15.7% in Q2

MNB

Credit institutionsʼ lending to small- and medium-sized enterprises expanded by 15.7% from a year earlier in Q2 2018, after increasing by 13.7% in the first quarter, data from a National Bank of Hungary (MNB) report shows.

The annual growth rate of credit institutionsʼ lending to the entire corporate segment reached approximately 12% at the end of the second quarter as the outstanding borrowing of non-financial corporations in the past year rose by HUF 750 billion on a transaction basis, national news agency MTI reported.

Annual credit growth rate has been steadily accelerating in previous quarters, as it stood at 10.3% in Q1 2018 and Q4 2017 and was 8.7% in Q3 2017 and 7% in Q2 2017.

Credit institutionsʼ outstanding loans to enterprises increased by about HUF 239 bln in Q2 2018 as a result of transactions. Forint loans increased by HUF 123 bln and FX loans by HUF 116 bln. Other net flows were responsible for HUF 2 bln increase in lending.

Of the HUF 240 bln increase some HUF 140 bln was related to the SME segment, within that HUF 66 bln was related to the micro-, HUF 26 bln to the small- and HUF 44 bln to the medium-sized segment.

Including money market transactions, credit institutions concluded new contracts for HUF 1.034 trillion with non-financial corporations in Q2. The value of new forint loans totalled HUF 395 bln, with the value of euro loans amounting to HUF 387 bln. Separately, the value of new short-term loans was HUF 385 bln.

The total volume of new loan contracts concluded in the past 12 months reached nearly HUF 3.9 tln and exceeded that of last year by approximately 20%. This was mainly attributable to the nearly 30% expansion in forint loans.

Based on responses to the MNBʼs "Lending Survey", 12% of the banks eased their corporate lending conditions in net terms in the second quarter. Respondents mainly indicated a decline in interest rate spreads and the majority mentioned competition among banks, achievement of market share targets and favourable economic prospects among the factors contributing to the change.

The easing of credit conditions affected all corporate segments. In the micro- and small-sized enterprises segment and in the medium-and large-sized companies segment, in net terms, 22% and 11% of banks, respectively, indicated an easing of credit conditions.

Looking ahead to the next half year, one-fifth of the respondents expect further easing, which is expected to be attributable to increasing competition, and may mostly be reflected in a decline in spreads.

The interest rate on new euro loans decreased, falling to 2.65% for small loans and to 1.06% for large loans. The forint interest rate was 3.11% and 2.06%, respectively.

Demand for short-term loans was up at net 31.8% of the respondents and for long-term loans about 57.3% of them perceived the same. Nearly half of the respondents perceived a pick-up in demand for forint loans.

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