2015-06-03
Bank survey: the possibilities of residents and manufacturing companies to borrow improving
Commercial banks’ assessment of the financial status of households and many business sectors is basically positive; according to their projections, in the future it will be easier to borrow for residents and companies within some sectors. The latest survey of commercial banks, initiated by the Bank of Lithuania, reveals such expectations of credit institutions.
“Banks’ assessment of the future development of the loan portfolio is optimistic and they expect it to grow moderately. This year, manufacturing and trade companies, as well as households, will have better possibilities to borrow,” says Darius Kulikauskas, Head of the Macroprudential Analysis Division of the Financial Stability Department at the Bank of Lithuania.
Changes in the credit standards for enterprises
Almost half (45.5%) of the surveyed banks reported that the competition in the provision of loans to manufacturing companies would increase, which will enhance their possibilities to borrow. In addition, 36.4 per cent of the surveyed banks reported increased competition in lending to trade companies and 27.3 per cent to households. At the same time the respondents said they did not limit loan provision namely for these sectors.
Nevertheless, banks’ assessment of some business sectors involving higher risk is cautious and it may become more difficult for enterprises within these sectors to get a loan from banks. For example, 54.4 per cent of the surveyed banks indicated that interbank competition would decrease in lending to transport sector enterprises, 36.4 per cent — to companies engaged in real estate, and 18.2 per cent — to enterprises engaged in the construction business and the same percentage to the hotel and restaurant business. Banks limited their lending mainly to these economic activities accordingly.
According to the survey data, commercial banks expect to expand somewhat their loan portfolio this year. Stronger growth in lending is expected from enterprises, while growth in housing loans to households will moderate.
The general terms of bank lending to non-financial undertakings and housing loans to households in the first quarter of 2015 remained unchanged, while those of consumer finance and other loans to households eased somewhat. The easing in the credit standards of consumer finance and other loans was due to the improved solvency of borrowers; the margins of consumer finance and other loans involving average risk decreased.
In the future banks intend to ease somewhat their general terms of consumer finance and other loans to households, but the terms of housing loans to households will tighten up a little. General bank credit standards for non-financial undertakings are not likely to change in the near future.
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. From 2015 the results of the lending survey of commercial banks operating in Lithuania and of foreign bank branches are included in the results of the euro area bank lending survey, which is published by the European Central Bank (ECB). Considering current practices, the ECB is submitted the results of the survey of the four banks with the largest market share in terms of assets held (as of 31 December 2014, it accounted for 81.3%). The lending survey of euro area banks, which, from April 2015, also publishes a data summary of the survey of the four largest banks in terms of assets held, which is conducted in Lithuania, is available on the website of the ECB (https://www.ecb.europa.eu/stats/pdf/blssurvey_201504.pdf (1 MB download icon)).