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A week and a half later than usual, Magyar Nemzeti Bank released the credit and deposit statistics for the Hungarian banking sector this morning. At first glance, the numbers on many fronts are staggering, as despite the coronavirus crisis, they show that retail lending has continued to hit.
- the new contractual amount of home loans increased by 9% year-on-year to HUF 84.5 billion, which is almost a new monthly peak,
- The new contractual amount of baby loans, with an amount of HUF 61.4 billion, has not been as high since October,
- Only the new contractual amount of personal loans fell 25% among the main types of loans.
The increase in home loans and waiting baby loans can be explained by these typically
They have a much longer response time than personal loans, so in many cases loan applications in January-February are still reflected in the new contract amounts, especially for home loans. The issuance of personal loans would also have increased, even in March, if the maximum limit of 5.9% APR had not entered into force after March 18, prompting banks to develop new products, suspending contracts for a weather.
Our chart below shows that there was a jump in retail loans in the second half of 2019 due to the emergence of baby waiting loans, other than the March data is pretty much in line with the past few months, the raw data they hardly show the impact of the corona virus and the government’s emergence.
Retail loans are practically at the pre-crisis level of 2008, according to data from recent months.
In the past 12 months, households have borrowed more than HUF 2.6 billion in loans, which is much higher than in 2007-2008 thanks to the baby waiting loan.
Data on net loans, that is, the difference between loans and repayments, also shows that March was a solid month for retail loans, with momentum at the beginning of the year still good. In these data, the effect of the repayment moratorium is expected to be significant from April: net indebtedness will increase due to suspension of repayments, even though gross indebtedness is expected to decrease.
Despite the apparent rise in yields in February, retail loan rates have yet to rise significantly, and their impact is likely to be more pronounced in the coming months after the MNB monetary adjustment in April. The average interest rate on new home loans was 4.02% in March, compared to 4.82% the previous year, while the average interest rate for fixed-rate home loans fell nearly 1 percentage point .
Other loans have also become cheaper in the past year, with an average APR for personal loans falling, for example, from 13.3% a year earlier to 12.2%, but with the first APR below 5.9%. You can also include the effect of personal loans.
The proportion of housing loans with a floating interest rate within a year in new loans remains insignificant, below 2%, while the proportion of the existing housing loan portfolio as a whole may still be between 40- fifty%. The share of fixed-rate loans in new loans until the end of the term and for at least 10 years increased further.
As a result of the loan repayment moratorium, not only is the net indebtedness expected to increase, but the amortization of the entire loan portfolio will also slow down: either there will be no decrease in the loan portfolio or it will only be moderate. Over the past 12 months, total retail loans increased 18%, home loans 9%, and personal loans 24%.
There are also more interesting developments in deposits than in loans: many might think that in March, as one of the panic reactions to the coronavirus, many withdrew a significant amount of money from the bank, which could have led to a large decrease in bank deposits. However, this was not the case: March was the 4th best in the last 12 months in terms of net deposits, as HUF 126 billion more deposits were placed in banks than the population took (net transaction).
It is not so difficult to guess what the reason for this strange phenomenon could have been: in the same month, the net transaction of securities of the retail government was HUF -41 billion, that of investment funds HUF -140 billion, and
Even if there was a significant withdrawal of deposits, this could be more than offset by the fact that much of the consideration for the securities sold remained in the bank accounts as reserve for the time being.
This seems to be confirmed by the fact that the participation of demand deposits has continued to increase, reaching almost 75% within deposits. A possible explanation is also that some companies tried to improve their liquidity of capital backed by cash or loans in March, and these amounts appeared temporarily in retail bank accounts in the first weeks of the epidemic. As a result, retail deposits were 9.4% higher at the end of March than the previous year.
The same can be said for corporate deposits, whose total value also increased even more in banks in March, making it 19% (!) Higher than the previous year. Loans also increased in March, with MNB’s annual change in corporate loans at 18.5% (!).
More detailed data shows that long-term loans have also increased very well, so while the increase in loans may have some effect in reducing liquidity loans, this is far from explaining the buoyancy of the loan market. corporate in March. Continuous 12-month data shows a new record: Last year (until the end of March) 1,263 billion more corporate loans were taken out of banks in Hungary than paid off.
The entire year is not expected to be as optimistic as previous figures show. There is a high probability that loans will decrease dramatically this year and only recover next year, even more so in 2022. The views of the audience of our two online lending conferences so far are summarized here based on the votes of the audience:
Cover image: Shutterstock
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