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Demand for business loans is growing at a record high

Ukrainian banks note a record growth in demand for business loans, predict an increase in volumes and an improvement in the quality of loan portfolios. This is evidenced by the results of a survey on the conditions of bank lending by the NBU.

Demand is growing

In October – December 2021, the demand for business loans increased to a record, the most for short-term, hryvnia loans and SME loans. The determining factors were the need of enterprises mostly for working capital and to some extent for capital investments. For SMEs, low rates remained an additional factor in increasing demand.

In the 4th quarter, banks confirmed the positive sentiments of previous surveys regarding credit dynamics: respondents noted a long-term increase in demand for loans from households, record growth from businesses, and also maintained expectations of further activation of demand for hryvnia loans, SME loans, and mortgages.

Banks reported a more significant easing of business lending standards than before and a record increase in approval rates.

Population demand for loans has also been growing for six consecutive quarters. The improvement in consumer sentiment and the increase in spending on durable goods contributed to the revival of demand for consumer loans.

Mortgage lending was fueled by lower interest rates. Retail lending standards have been easing for five consecutive quarters. Household debt burden remains below average.

In the IV quarter of 2021, survey participants noted an increase in currency and credit risks, while interest rate risk decreased.

Lending prospects

Banks positively assess lending prospects: in the next 12 months, 92% of respondents predict growth in the loan portfolio of households, 79% of corporations. Banks expect the quality of the loan portfolio to improve in both segments.

Responding to survey questions, respondents noted that in the I quarter of this year, they do not plan to change credit standards for corporate clients in general, while they plan to relax credit standards for both mortgages and consumer loans.

In the next 3 months, banks forecast further growth in credit, currency and liquidity risk, while expecting interest rate risk to further decline.

Survey methodology

The current survey was conducted from December 17, 2021 to January 11, 2022 among credit managers of 24 banks, whose share in the total assets of the banking system is 89%. The results of the survey reflect the opinion of the respondents and are not estimates or forecasts of the NBU.