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Defaults on restructured loans could grow as grace periods expire

Corporate and retail lending conditions are likely to remain unchanged over the next six months, but the number of lenders “re-defaulting” on restructured loans could grow further as grace periods expire, a quarterly survey of loan officers by the National Bank of Hungary shows.

“Overall, banks do not expect any considerable changes in credit conditions in either the household or the corporate segment over the next six-month period,” the MNB said, adding that this implies conditions could remain tight in the corporate segment.

The share of restructured loans in total lending stock grew slightly in Q3, but the ratio of restructured loans more than 30 day delinquent rose from 25% to 27%, the central bank said. The ratio of restructured loans on which borrowers “re-defaulted”, falling more than 90 days behind on repayments, climbed from 12% to 17%, it added, linking the increase to the expiration of grace periods.

The survey showed grace periods have expired on only 15% of restructured mortgage loans so far, but will expire on half of the stock in the next six months.

The percentage of restructured mortgage loans in Hungarian banks' retail portfolio rose from 6% to 7% in Q3, said MNB analyst Gergely Fábián. Their stock reached HUF 350 billion-400 billion at the end of September, he added. (MTI – Econews)