2017-12-15
Survey: Banks look to 2018 with optimism but are more cautious towards construction and RE activities
After markedly increasing lending to residents and businesses this year, banks are not going to slow down in 2018. According to the bank lending survey, next year banks’ loan portfolio is expected to grow even faster than this year. Nevertheless, banks’ assessment of the real estate (RE) and construction sector, as well as of the expectations about RE price increases slightly moderated.
‘Expectations about crediting are rather optimistic – nearly all of the surveyed banks report they will increase lending to residents and business next year. Banks project the brightest outlook for manufacturing and trade enterprises, as well as lending to residents, although growth in lending for house purchase is likely to stabilise,’ says Jokūbas Markevičius, Principal Economist of the Macroprudential Analysis Division at the Bank of Lithuania.
A third of the surveyed banks report that the aggregate loan portfolio will expand up to 10 per cent, one third more expect growth to be up to 15 per cent, whereas one bank projects an increase higher than 15 per cent. Slightly more banks expect stronger growth in business crediting, which has recently been increasingly encouraged by enterprises’ growing investment and the increasing demand for working capital.
Residents’ borrowing for consumption is likely to strengthen as well, as they dare buying durable goods, e.g. a car, or renovating their housing. Six banks out of ten expect growth in the consumer loan portfolio next year. However, banks’ expectations about growth in the housing loan portfolio are more reserved. Most of the surveyed expect that next year the housing loan portfolio will remain unchanged or will expand by up to 5 per cent.
The contribution to the projected moderation in housing credit growth stems from banks’ somewhat less cautious expectations about the outlook for the RE and construction sector and RE prices. Five banks out of ten, in assessing general housing price trends in the secondary market, do not expect growth; three banks expect the prices to rise by up to 5 or 10 per cent, whereas two banks project a drop in prices.
Heads of the loan divisions of banks operating in Lithuania participated in the survey. Recent data shows that banks’ projections are somewhat more optimistic than actual changes; however, they reflect banks’ expectations in the credit market. More information on credit standards applied by banks, their changes, and banks’ expectations is available in the latest Review of the Bank Lending Survey. The Bank of Lithuania conducts such surveys on a biannual basis.