Ukrainian banks improve expectations on lending prospects - NBU poll

This is evidenced by a quarterly survey of banks on lending conditions, the National Bank press service reports, according to Ukrinform.

"Banks have improved their expectations regarding lending prospects: the share of respondents expecting an increase in the volume of business lending has returned to the pre-war level. Banks' assessments of credit standards, demand, approval of loan applications, and other lending indicators have been on the rise over the past three quarters," the statement says.

It is noted that the demand for corporate loans in the first quarter was strengthened by the need for working capital, but the change in interest rates kept it restrained. In the second quarter, banks expect an increase in demand for all types of business loans. Most of them are for loans to small and medium-sized businesses, as well as short-term and hryvnia loans.

Respondents foresee higher demand for retail loans in the second quarter as well, mostly for mortgages. Household demand for mortgage loans continues to grow for the second quarter in a row thanks to improved consumer sentiment and rising savings. At the same time, the revival of demand is slowing down the restrained expectations regarding the real estate market development. Banks expect no decline in the quality of corporate loans over the next 12 months, while it will deteriorate slightly for households, they believe.

In the first quarter, banks strengthened corporate lending standards. Most of them are for long-term and foreign currency loans. In the second quarter, further strengthening of standards is predicted. To a greater extent, it will be for large enterprises and long-term loans. At the same time, financial institutions intend to slightly loosen credit standards for SMEs.

For the first time since the fourth quarter of 2021, banks eased loan standards for the population. To a greater extent, this regards consumer loans. This was facilitated by improved expectations of economic activity, better exchange rate expectations, and an increase in the population’s solvency. Mortgage standards have eased due to higher competition among banks and lower inflation expectations. In the next quarter, the respondents plan to relax credit standards for consumer loans, and strengthen them for mortgages. In the first quarter, respondents noted growth of all types of risks, except for liquidity. Liquidity risk decreased for the second consecutive quarter. In the second quarter, banks expect a strengthening of all types of risks without exception.