Survey: improving expectations and increasing competition encourages banks to mitigate credit conditions
Expectations for the country’s economy and increasing competition encourages commercial banks to facilitate credit to not only small and medium-sized businesses, but also to mitigate housing loan conditions for residents. With increasing demand and eased lending conditions, banks expect next year an almost 3 per cent growth in the loan portfolio.
“Banks that participated in the Bank of Lithuania’s survey indicated that in the previous half-year they eased lending conditions and project that in the future it will be easier to get a loan. The most frequent reason that banks indicated was improved expectations for the economy, the increase in banks’ own ability to attract funding and increased competition,” says Virgilijus Rutkauskas, Chief Economist of the Macroprudential Analysis Division of the Financial Stability Department of the Bank of Lithuania.
Factors influencing the conditions of loans and credit line to enterprises
(negative difference in percentages show a softening of lending conditions)
Banks evaluated the financial status of a number of economic activity enterprises and households as essentially good and only the financial status of construction companies was rated by most banks as being poor. The financial status of agriculture, forestry and manufacturing companies was assessed as being best. The future prospects of almost all sectors were evaluated by banks as being stable; they were more sceptical only in regards to the prospects of the transportation sector.
In the opinion of the surveyed banks, in 2014 the demand for business loans will keep rising, housing loans will add to their portfolio, and the average growth rate of their loan portfolio will be about 3 per cent.
The conditions for housing loans, which for a year and a half had been stricter, in the past six months softened — some banks have reduced the requirements for the loan-collateral ratio and collateral itself. Lending for house purchase is evaluated by banks better, because the housing market’s outlook has become more favourable than in the previous half year. Almost half of banks surveyed noted that demand has increased for such loans, and an even greater share (two-thirds) indicated that demand will increase in the next six months.
The credit standards for the approval of consumer credit and other loans for households became stricter in the period under review, i.e. more of the surveyed banks tightened somewhat their credit standards as applied to such loans. This was felt by consumer and other loan borrowers from the increasing margins.
Lending surveys of commercial banks and foreign bank branches are conducted twice a year in order to obtain information on the non-interest related credit standards, borrowing costs and market expectations of financial institutions. Six commercial banks and three foreign bank branches provided answers for the bank surveys, conducted in September–October 2013.
The detailed Bank Lending Survey (572.1 KB ) (572.1 KB )can be found on the Bank of Lithuania website.