How the coronovirus crisis in Ukraine affected lending


Banks’ expectations began to improve for the next 12 months

How coronovirus crisis affect lending in Ukraine – NBU. Photo:

In the second quarter, coronoviruses negatively impacted domestic and commercial demand for lending and lending standards. This is evident from the results of a new survey of NBU on the terms of bank lending.

According to the regulator, the surveyed banks expect a reduction in loan demand from households and businesses, as well as loosening loan terms in the next quarter.

According to the survey, in April-June 2020, business demand for loans remained almost unchanged compared to the previous quarter. However, there has been some growth in small and medium-sized enterprises (SMEs). Here, the major factors were debt restructuring, cheaper cost of debt, need for money shares and working capital.

On the part of large enterprises, the main factors leading to a decrease in demand were a decrease in the shares of funds, working capital and their needs for capital investment.

Demand for loans among the population, especially in consumer loans, also decreased due to suppressing consumer sentiment and decreasing spending on durable goods.

At the same time, interest in loans between population and businesses supported Reduction in interest rates on loans… This trend continues for the fourth consecutive quarter. At the same time, in the second quarter, banks in a row strengthened the lending standards (internal rules and norms that govern the bank in their credit policy) for the second quarter. For business, such growth is associated with negative exchange rates and banks ‘economic expectations, with loans to the population – with expectations of borrowers’ solvency declining and overall economic activity in the country declining.

Also, for the second consecutive quarter, the level of approval of loan applications declined. In the second quarter, 79% of the surveyed banks saw an increase in credit risk levels, but in general, the risk level assessment in the second quarter was better than the previous one, NBU’s press service reported.

National Bank said that Negative expectations of banks have been exceeded Last quarter, and already in the current survey, banks’ expectations began to improve for the next 12 months. Nearly 60% of respondents expect their loan portfolio volume to increase over the next 12 months – double that figure in the previous NBU survey. In particular, banks expect SMEs to increase loan demand.

Big banks are optimistic about the prospects of growth in the corporate portfolio, but at the same time, their expectations of recovery in consumer lending over the next 12 months have been tightened, though banks in consumer credit and mortgage demand in the third quarter Shortage is expected. At the same time, banks expect the quality of the loan portfolio to decline in the future, although these expectations have improved slightly compared to the previous quarter.

In addition, financial institutions reported Recovery in deposits: About half of the respondents expect an influx of funds from the population and business. The banks said they hope to lower lending standards for businesses and individuals (consumer loans and mortgages) over the next three months.

The survey was conducted from June 18 to July 9, 2020 among credit managers of 24 banks, which accounted for 91% of the total assets of the banking system.

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Earlier, we reported that the National Bank of Ukraine extended simplified rules to assess debt risk to borrowers affected by quarantine during the restructuring of loans.

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