Corporate, household lending continues to expand in Q2

Loan transactions expanded by an exceptional HUF 435 billion in Q2 2019, state news agency MTI reported in its summary of the latest MNB Lending Survey. Forint loans expanded by HUF 256 bln, while FX loans saw HUF 179 bln growth.

Long-term loans (with initial maturity exceeding one year) accounted for most of the growth, both in the case of forint and FX loans, in line with the remarkable intensity of corporate investment activity, the MNB said.

Net of money market transactions, credit institutions concluded new contracts totaling HUF 769 bln with non-financial corporations in Q2. The value of new issues remained practically unchanged compared to the previous quarters, and was slightly lower compared to the volume in the second quarter of 2018.

Over the past four quarters, outstanding loans of non-financial corporations rose by HUF 1.151 trillion based on transactions, corresponding to 16% annual growth. Forint loans increased by 21% year-on-year, while outstanding FX loans rose by 10%.

Corporate lending conditions largely unchanged

Credit conditions in the corporate segment remained practically unchanged in Q2 2019. In net terms, a mere 3% of credit institutions participating in the latest survey reported an easing of conditions, while the vast majority of banks left conditions broadly unchanged. Responding credit institutions said they do not expect a change in conditions in the next half year.

The financing costs of small loans increased slightly. Net of money market transactions, the average interest rate level on forint loans below EUR 1 million rose by 0.2 of a percentage point in Q2, and thus amounted to 3.1% in Q2. The interest rate on small euro loans increased by 5 basis points to 2.2% in the past quarter.

In contrast, the interest rate on big loan contracts declined. The average interest rate on big forint loans decreased by 4 basis points to 1.7%, while the average interest rate on big euro loans declined by 0.6 of a percentage point to 1.1%.

Demand for long-term loans increased. In net terms, 70% of participating banks experienced rising demand for long-term loans in Q2, while 40% reported mounting interest in short-term loans.

Housing loan outlays up 20%

The annual value of household loan transactions was close to HUF 500 bln, with a contribution of HUF 170 bln in Q2 2019, mainly due to higher housing and personal loans. 

In Q2, credit institutions concluded new loan contracts with households for HUF 472 bln, corresponding to 26% growth year-on-year. The granting of housing loans reached HUF 252 bln, rising by 20%, while personal loan outlays came to HUF 152 bln, with an annual average expansion of 36%.

Some 27% of the volume of housing loans granted in Q2 were fixed until maturity, one-fifth had five-year fixed interest, and around one-tenth were fixed for ten years. The share of loans with interest rates fixed for at least ten years rose from 20% to 25% in one year.

In the past 12 months, banks granted housing loans to a total value of HUF 904 bln. Although this exceeds the pre-crisis level in nominal terms, in real terms it only amounts to roughly four-fifths of the pre-crisis level.

No overheating, says MNB

The MNB said it does not consider the current dynamic growth in lending in the sub-segments overheated in either structure or volume, given the development of real economic processes and the low level of credit penetration.

Data show that in Q2, in net terms, 5% of banks eased conditions on housing loans further, which primarily affected spreads. Responding institutions indicated their favorable liquidity situation and housing market developments as factors supporting easing.

Banks did not make any major changes in conditions on consumer loans in Q2. In the second half of the year, in net terms, some 8% plan to tighten standards of consumer loans due to a decline in risk tolerance.

In net terms, 60% of banks participating in the survey reported an increase in demand for housing loans in Q2. In the case of consumer loans, however, institutions have experienced a downturn in demand for three quarters already. Looking ahead to the next half year, banks expect growth in both product groups.