Budapest, 4 November 2022 — According to the responses to the October Lending Survey, in 2022 Q3 banks reported tightening lending conditions in the corporate and household segments due to a deterioration in economic prospects, and looking ahead, even more of them indicated further tightening. The majority of the responding banks experienced a decline in credit demand, with significant contributions from the increasingly uncertain economic outlook as well as rising lending rates. Most of the institutions expect a further downturn in demand, with corporate short-term and foreign currency loans as the only exceptions. As regards commercial real estate loans, half of the banks reported a tightening in standards and a decline in credit demand, and they expect this trend to continue.
The Magyar Nemzeti Bank conducts a questionnaire-based survey in each quarter among the senior loan officers of domestic banks to report on current changes in credit demand and credit supply. The MNB's third quarterly Lending Survey was completed by the senior loan officers between 1 and 18 October 2022.
According to responses to the Lending Survey, a net 29 per cent of banks tightened their corporate credit conditions in 2022 Q3, citing deteriorating economic prospects, with 71 per cent of them expecting the same for the next half year. Half of the banks perceived declining credit demand from small enterprises in Q3, and they also indicated a weakening in demand for forint loans and long-term loans. Looking ahead, a net 48 per cent of the responding institutions expect an overall downturn in corporate credit demand, and while 85 per cent of them foresee a decline in the demand for long-term loans, 29 per cent of them expect a strengthening in demand for short-term loans.
In view of the challenges facing the commercial real estate market, half of the banks tightened standards on commercial real estate loans in Q3. However, only 24 per cent of them did the same in connection with housing projects. Due to banks’ changing risk tolerance, a net 62 per cent of the respondents are planning to tighten the conditions of access to loans in the case of housing projects in 2022 Q4 and 2023 Q1, while 72 per cent and 49 per cent of them are planning tightening in the case of shopping centres and office buildings, respectively. In Q3, a net 55 per cent of the responding institutions experienced a decline in demand for commercial real estate loans, and, looking ahead, 75 per cent of them expect a drop in demand. Even more of them (84 per cent) foresee the same for housing project loans.
In 2022 Q3, a net 32 per cent of banks carried out an overall tightening of standards on housing loans, mainly in view of the deterioration in economic prospects and clients’ creditworthiness. The tightening meant a stricter application of banks’ internal debt cap rules. At the same time, 53 per cent of the respondents reported further reductions of spreads in the rising interest rate environment. Looking ahead, a net 75 per cent of the responding institutions are planning to tighten credit conditions by increasing spreads. During the quarter, almost all responding banks perceived a decline in credit demand, and they expect this trend to persist in the final quarter of 2022 and in the first quarter of 2023.
Sixty per cent of the banks tightened the conditions on consumer loans during Q3 by raising the minimum required credit score, and looking ahead, 72 per cent of them held out the prospect of further tightening by raising spreads, primarily in the market of personal loans. A net 29 per cent of banks perceived a decline in demand for consumer loans in Q3, while looking ahead, a net 87 per cent of them expect a further downturn in demand in this segment in response to the expected decline in consumer confidence and disposable incomes.
In the Lending Survey, we use the so-called net change indicator, expressed as a percentage of respondents, to indicate changes. This indicator is calculated as follows: market share-weighted ratio of respondents projecting a change (tightening / increasing / strengthening) minus the market share-weighted ratio of respondents projecting a change in the opposite direction (easing / decreasing / weakening).
The detailed findings of the Lending Survey and the set of charts are available on the MNB’s website at:
https://www.mnb.hu/en/financial-stability/publications/lending-survey