NBP: Banks are afraid of a significant drop in demand for housing loans in 2018 Q3

Banks fear a further decline in credit market activity in the third quarter of this year, announce further tightening of lending policy towards enterprises and households and expect a decline in demand, which in the case of long-term corporate and housing loans be significant, according to a survey by the National Bank of Poland (NBP).

The deteriorating economic outlook and the increase in interest rates significantly limited activity on the credit market in the second quarter of 2022. Banks tightened the standards of granting all types of loans and recorded a decline in demand in most segments of the loan market, with the exception of short-term loans to large enterprises and consumer loans. The decrease in demand was mainly motivated by a decrease in the demand for long-term financing of corporate investments and the deterioration of the situation of households and forecasts for the situation on the housing market. in the report entitled "Situation on the credit market - results of the survey to the chairmen of credit committees, Q3 2022".

In the segment of corporate loans, the banks expect a further tightening of lending policy towards enterprises, more often in the case of large enterprises; a significant drop in demand for loans, especially long-term ones.

"In the third quarter of 2022, banks plan to further tighten lending criteria for enterprises, more often in the case of large enterprises than in the SME sector (net percentages for short-term and long-term loans, respectively: large enterprises: -48% and -55%, and the SME sector : -13% and -21%) ", the report reads.

"Banks' forecasts regarding demand for all types of corporate loans are still pessimistic, with 28% of the banks believing that the decline in demand for long-term loans to large enterprises may be significant (net percentages for short-term and long-term loans, respectively: large enterprises : -25% and -77% and the SME sector: -33% and -63%) "- we also read.

In the second quarter of 2022, banks noticed a decline in demand in most corporate loan segments. A significant part of the banks recorded a decline in demand for short-term and long-term loans to SMEs and long-term loans to large enterprises (-74%).

In the case of short-term loans to large enterprises, the banks observed various trends: 33% of the banks experienced an increase and 27% - a decrease in demand (net percentage: 6%).

In the segment of housing loans, the banks expect a slight tightening of lending policy in the third quarter of 2022 with a marked decline in demand.

In the third quarter of 2022, individual banks forecast a tightening of the standards of granting housing loans (net percentage: -8%), while most of them expect a further decline in demand for these loans (net percentage: -73%), and in the opinion of 42% of banks, this decline will be significant.

According to the report, in the second quarter of 2022, banks again recorded a decline in demand for housing loans, and 78% of the banks considered this decrease to be significant.

According to the banks, this was mainly due to: deterioration in the economic situation of households (net percentage: -87%), changes in consumer spending (-81%), forecasts for the housing market (-61%), tightening of the criteria (- 63%) and terms of granting housing loans (-47%), as well as the use of alternative sources of financing (-27%), including loans from other banks, household savings and other sources of financing, according to the report.

The second quarter of 2022 was another period of tightening of the standards of granting housing loans by banks (net percentage: -77%), and 60% of the banks described this tightening as significant. The banks lowered loan spreads (35%) without significantly changing the other loan terms and conditions included in the survey.

In the third quarter of 2022, banks plan to tighten the standards of granting consumer loans (net percentage: -42%) and expect a decrease in demand for these loans (net percentage: -64%).

In this segment, in Q2, the lending policy was characterized by a tightening of the criteria of the lending policy, motivated by, inter alia, deterioration in the situation of households and an increase in interest rates with a simultaneous increase in competitive pressure; tightening of most lending terms, including the loan margin and the margin on riskier loans, with an increase in the maximum loan amount.

At the same time, in the last quarter, banks reported an increase in demand as a result of an increase in demand for financing durable goods, with multidirectional responses from banks.

The survey was conducted at the beginning of July 2022 among 23 banks whose total share of claims on enterprises and households in the banking sector portfolio amounts to around 88%.

Source: NBP and ISBnews