Banks remain optimistic about lending development – NBU survey
29 January 08:49
Banks note a further increase in demand for corporate and consumer loans and expect loan portfolio growth in the next 12 months. This is evidenced by the results of the quarterly Bank Lending Conditions Survey, "Komersant Ukrainian" reports.
Demand for loans is growing steadily
The survey showed that demand for corporate loans grew in the fourth quarter of 2024, as it did throughout 2024. Estimates of loan demand for large enterprises were the highest since 2021.
Loan demand was driven by lower interest rates and business needs for capital investment and working capital. In the first quarter of 2025, respondents forecast an increase in demand for all types of business loans, except for short-term loans.
Household demand for consumer loans also increased in the fourth quarter and throughout 2024, driven by better consumer sentiment and higher spending on durable goods. The optimistic outlook for the real estate market and lower interest rates fueled demand for mortgages. In the first quarter of 2025, respondents expect demand for consumer loans to remain unchanged and mortgage demand to decline.
Lending conditions are easing, but not for foreign currency loans
Lending standards for businesses remained generally unchanged. Increased competition between banks has stimulated a relaxation of lending standards for corporates. Banks also eased them somewhat for small and medium-sized enterprises. At the same time, credit standards for foreign currency loans were tightened.
In the first quarter of 2025, banks plan to ease lending standards for large enterprises, short-term and hryvnia loans, while tightening them for foreign currency loans.
Competition makes banks more willing to provide loans
Banks have eased lending standards for mortgages and consumer loans in light of intense competition from non-bank financial institutions. An additional driver for the easing of mortgage standards is the improved prospects for the real estate market. In the first quarter, respondents plan to ease lending standards for consumer loans and tighten them for mortgages.
The approval rate for consumer loans increased, while the approval rate for mortgages decreased, mainly in some large financial institutions.
The NBU also notes that respondents reported a moderate increase in credit, operational, and currency risks at the end of 2024, and predicted an increase in all types of risk except operational risk in the first quarter of 2025.
What was lending like in 2024?
In general, lending recovered last year, but its dynamics in terms of individual segments and currencies was heterogeneous. Danylo Hetmantsev, Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy, draws attention to this and provides the following data:
– Loans in hryvnia grew by 14.1% (plus UAH 102.3 billion) to UAH 828.7 billion, while loans in foreign currency decreased by 5.7% (minus USD 0.38 billion) to USD 6.28 billion.
– The growth rate of hryvnia lending in the corporate segment was 2.5 times lower than in the retail segment. In 2024, hryvnia loans to businesses increased by 9.8% (plus UAH 50.6 billion), while loans to households grew by 24.5% (plus UAH 51.7 billion). Taking into account the reduction in foreign currency lending, the growth rate of the loan portfolio in all currencies in the corporate segment was almost three times lower than in the retail segment.
– Interest rates on new hryvnia business loans (excluding overdrafts) tended to decline. The average annualized rate decreased from 19.3% in 2023 to 15.8% in 2024. At the same time, at the end of the year, amid rising inflation and the NBU discount rate, the interest rate on new hryvnia business loans increased from 14.4% to 14.7%. Retail lending rates (to households) remained stable throughout the year at 34%.
Thus, compared to 2022-2023, when lending declined or stagnated year after year, last year was the first year of its full recovery. According to Danylo Hetmantsev, several factors contributed to this:
– maintaining the stable operation of the banking system, which is adequately capitalized, liquid and highly profitable;
– continued economic growth and growth in real incomes (which translates into an improvement in the financial condition of borrowers, primarily in the retail segment)
– reduction of interest rates;
– support through government programs: portfolio guarantees, eHouse and 5-7-9 programs, although the contribution of the latter program was declining.
