2014-11-13
Banks surveyed by the Bank of Lithuania claim that high competition and liquidity prompts easing of lending conditions for businesses, while the loan portfolio quality is improving. It is projected that the general loan portfolio will grow moderately next year.
“The general loan conditions at banks have been easing for more than two years, while recently both small and medium sized businesses were able to borrow easier. Nevertheless, banks cautiously accessed issuance of riskier loans to businesses,” says Darius Kulikauskas, Head of the Macroprudential Division of the Bank of Lithuania’s Financial Stability Department.
Changes in the credit standards for business
(a negative percentage difference shows the easing of the lending standards)
According to the survey data, banks eased the lending conditions by decreasing the average risk loan margins, and also applied less strict than before collateral requirements. The surveyed banks foresee that by December 2014 the general lending conditions to businesses will be slightly changed. One bank indicted that they plan to slightly ease the conditions of the issuance of all kinds of loans to undertakings; two banks indicated indicated that they plan to ease lending conditions to small- and medium-sized businesses. On the other hand, one bank over the nearest quarter will slightly tighten lending conditions to large undertakings.
About 40 per cent of respondents indicated that the quality of loans for businesses or households improved over the last quarter. Over the half year, the share of such banks increased by 10 p.p.
Next year banks expect moderate credit growth — slightly more than half of all banks that issued loans project a growth in the loan portfolio of 0 to 5 per cent. The most optimistic assessment is for the outlook of the portfolio of loans issued to physical persons — housing and consumer loans. Almost all banks that participated in the survey indicated the housing loan portfolio as increasing next year. The growth in consumer loans in 2015 is expected by 80 per cent of banks managing such loan portfolios.
The surveyed banks claim that they feel a slightly increasing demand for business loans and credit lines. Banks assessed best the financial condition of agricultural and forestry undertakings. For the first time since 2008 the financial condition of construction undertakings was assessed as being good, but due to the geopolitical tensions in the East and their economic consequences, transportation undertakings were assessed more poorly.
Lending surveys of commercial banks and foreign bank branches are conducted in order to obtain information on the non-interest related credit standards, borrowing costs and market expectations of financial institutions. The detailed Review (427.4 KB download icon) of the Bank Lending Survey can be found on the Bank of Lithuania website.