2016-05-10
Banks operating in Lithuania lend to businesses more and for longer periods. Banks basically did not change the conditions for loans for house purchase and are not going to do so in the near future, while the lending standards for those wishing to get a consumer credit are likely to be tightened somewhat, shows the Banking Survey conducted by the Bank of Lithuania.
‘Banks have eased their requirements for small- and medium-sized businesses; as a result, businesses were able to receive larger and longer-term loans in the first quarter of 2016. Banks competed the most in crediting retailers: this sector’s financial status was assessed to be the best, while no bank limited lending to it. In the next quarter, competition is likely to increase most due to credit extension to businesses engaged in manufacturing, trade and agriculture,’ says Andrius Škarnulis, Head of the Macroprudential Analysis Division.
Nevertheless, banks did not credit all businesses. Most surveyed banks (five out of ten) reported they had limited lending to businesses in the real estate sector. They also credited more cautiously businesses engaged in the transport, hotel and restaurant, and construction activities (three out of ten banks claimed to limit lending to these sectors).
According to A. Škarnulis, the aim of businesses to satisfy the growing demand for investment and working capital as well as the overall level of low interest rates have contributed to the moderate growth in the demand for business loans.
Household demand for loans for house purchase remained basically unchanged, increasing, however, for consumption. According to banks, the growth in the demand for consumer loans was not only driven by the increasing confidence of consumers and low interest rates but also by intensified acquisition of durable goods such as motor vehicles or household appliances.
Banks claimed they are not going to change the lending conditions for households for house purchase in the near future; however, the conditions for the extension of loans for consumption are likely to tighten somewhat.
Compared to the previous survey, banks expect stronger growth in houseprices: seven out of ten surveyed banks reported expecting an increase in prices of newly built homes of up to 10 per cent, while one more survey participant expected the prices for such homes would pick up by 10–20 per cent. The increase in the prices of existing housing units and commercial premises is likely to be less robust.
For more information about credit standards applied by banks and credit standards for households and businesses, contributions to their developments and bank expectations, go to the most recent Bank Lending Survey (in Lithuanian).