MNB: lending rates have not yet risen as much as market yields

The main messages of the Lending Processes publication

In the second quarter of 2021 a corporate loan portfolio annual growth rate It was 7 percent while a 21 percent in the SME segment growth rate was realized on an annual basis.

The volume of corporate loans concluded during the quarter was 40 percent higher than in the same period last year.

A retail loan portfolio Quarterly expansion of HUF 424 billion 16 percent This resulted in an annual loan dynamics, to which, in addition to the stable issuance of baby loans, record-breaking contracts of housing loans of HUF 364 billion also made a significant contribution.

According to the MNB, in this

  • the new home-building subsidies available from 2021 played a significant role, however
  • the rise in house prices,
  • inflation expectations and
  • also demand brought forward in connection with the rate hike cycle

may have had an impact on unprecedented lending. Banks did not change either corporate or residential lending conditions during the quarter, however, they perceived a pick-up in credit demand in both segments, which may strengthen further for the rest of the year.

Corporate loans

In the second quarter of 2021, the corporate loan portfolio decreased by HUF 11 billion on a transaction basis. In the 12-month period ending in June, loan disbursements exceeded loan repayments by a total of HUF 656 billion, as a result of which corporate bank loans increased by 7.4 per cent. Taking into account corporate bonds subscribed and purchased by banks, the stock of loans and bonds of credit institutions to the non-financial corporate sector increased by a total of 12 per cent over the same period. The payment moratorium introduced in March last year had a positive effect on the reduction of capital repayments, while the central bank and government loan and guarantee programs introduced to mitigate the economic effects of the coronavirus had a positive effect on new contracts. During the second quarter, companies concluded new loan agreements worth approximately HUF 941 billion, which was 40 percent more than in the same quarter of 2020. The loan portfolio of micro, small and medium-sized enterprises grew by 21 percent year-on-year, supported significantly by FGS Hair, which accounts for nearly two-thirds of SME loans taken out during the quarter. Although the FGS Fund will be exhausted in the summer months, the gradual and continuous drawdown of contracts concluded under the program will support the SME credit market in the period after the end of the program, in 2021.. Along with the abundant lending capacities of banks and other state-supported loan programs, the healthy credit dynamics of the SME segment is expected to continue in the future.

According to the responses of the banks participating in the Lending Survey, corporate lending conditions did not change significantly in the second quarter, while there was a pick-up in demand for both short-term and long-term loans.

Looking ahead, banks are planning a easing of lending conditions in each company size category in the second half of 2021, and project a further pick-up in demand in parallel.

Retail loans

The retail loan portfolio expanded by HUF 424 billion in the second quarter of 2021 as a result of transactions, accelerating the annual growth rate to 15.8 percent. The outstanding expansion is mainly due to the dynamic growth of housing loans and baby loans, the latter product already accounting for 15 percent of the retail loan portfolio in June. THE

The volume of HUF 364 billion of housing loans issued during the quarter reached a new historical peak,

in which the new home-building subsidies available from 2021 played a significant role. The one-year retail loan issuance, which closed in June 2021, was 10 percent below the level of the previous year, which is explained by the high base caused by the strong upswing in baby-waiting loans following the start of July 2019. Within home loan applications, the purchase of second-hand homes continues to dominate, but the share of loans spent on renovation and modernization is gradually increasing. For these purposes, two and a half times more loan agreements were concluded during the quarter than in the same period last year. The volume of the Family Home Creation Discount required for the purchase of both used and new flats increased significantly during the quarter, within which the largest volume is still represented by the village CSOK. The APR-based average spread on housing loans decreased in all interest rate fixing categories, whereas the pass-through of long-rising yields to bank interest rates since the beginning of the year has not yet been fully realized,. In the case of personal loans, a decrease in spreads was also observed during the quarter, in which the spread of Qualified Consumer-Friendly Personal Loans also played a role.

Based on the responses to the Lending Survey, banks did not change the terms of their home loans during the quarter, but all institutions perceived a pick-up in credit demand, which may strengthen further in the rest of the year as a result of the central bank’s Green Home Program.

Looking ahead to the next six months, banks do not plan to change the conditions of housing loans, and in the case of consumer loans, a small proportion of institutions have set a prospect of easing.

According to the Banking Survey, in line with the intensifying banking competition, half of the responding institutions plan to increase their exposure in the retail segment in the second half of 2021, but nearly one-fifth expect the portfolio to deteriorate after the general moratorium ends can be read here.

Cover image: Shutterstock

Source: – Bank by

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