2011-05-25
Surveys of the Bank of Lithuania: banks expect larger demand for loans, enterprises do not intend to borrow much
Domestic banks expect a rapid growth of the demand for loans, whereas enterprises intend to continue financing the largest share of their operating expenses by using internal resources. The existing gap between the demand for borrowing forecasted by banks and enterprises was revealed by the results of the latest surveys of banks and enterprises conducted by the Economics Department of the Bank of Lithuania. They also show that in the current half of the year banks eased lending conditions for the first time since the beginning of 2006.
“During the next half of the year (until October of this year), the majority of banks intend to continue easing lending conditions gradually and expect the demand for loans to grow quite rapidly. According to assessments of banks, the total value of the portfolio of loans granted should grow this year by 4–5 per cent”, the survey results were commented by Mr. Mindaugas Leika, Head of the Financial Stability Division of the Economics Department of the Bank of Lithuania.
According to Mr. Leika, the largest impact on lending conditions was made by the decline in interest margins of loans, administrative charges, restrictions on the size of a loan or credit line and on the loan to collateral ratio.
The improvement of macroeconomic expectations and the rise of competition in the crediting market were the main factors that determined the easing of the crediting policy of banks. However, faster easing of lending conditions was restricted by the fact that operational risk of certain business sectors (real estate, construction, hotels and restaurants) did not decline.
The surveys show that the requests of almost a half of all enterprises that wished to borrow this year were satisfied. The main reasons of unsatisfied requests were a poor assessment of the financial situation of enterprises, excessive level of indebtedness of enterprises and the persisting risk of economic environment.
According to banks, the growth of the demand for borrowing for the second consecutive sixth-month period was largely determined by improving housing market prospects, increasing consumer confidence and the need of enterprises to finance the acquisition of reserves, current capital and capital investment.
When commenting the results of surveys, Mindaugas Leika noted that tight bank lending policy is not an essential factor limiting the operation of enterprises. The operation of enterprises last year was mostly restricted by the shortage of demand from customers, whereas in the first half of this year enterprises were mostly concerned about rising production costs and the shortage of suitable employees.
Bank lending surveys are conducted twice a year since April 2006. This year, non-financial enterprises were surveyed for the first time.