NATIONAL BANK OF ROMANIA

Transcription

1 NATIONAL BANK OF ROMANIA Bank Lending Survey November /15

2 Bank Lending Survey 1, November 2014 Summary Credit standards saw a moderate easing in 2014 Q3 for companies and remained unchanged for households. For 2014 Q4, an easing of credit standards is forecasted for both sectors. Corporate loan demand contracted moderately on the whole, with banks expecting a marginal reduction in 2014 Q4 as well. As for households, demand increased for real-estate loans, but shrank for consumer credit. Table 1. Summary of banks opinions on developments in loan supply and demand Loan category Real-estate Households Consumer Supply Demand 2014 Q Q4 (expectations) 2014 Q Q4 (expectations) Companies, total Note: For the loan supply, the arrow pointing upwards/downwards/horizontally shows a(n) easing/tightening/no change of credit standards. For the loan demand, the arrow pointing upwards/downwards/horizontally shows a rise/contraction/no change, in line with banks opinions (over the past three months and expectations over the next three months, respectively). The blue colour indicates marginal changes and the red colour shows moderate and large changes. A. Non-financial corporations Credit standards saw a moderate easing in 2014 Q3 after having stayed unchanged during three successive quarters. For 2014 Q4, credit institutions expect a marginal easing of credit terms and conditions, irrespective of the type of loan. Credit terms and conditions were eased in 2014 Q3, as banks relaxed moderately their collateral requirements, whereas the spread between the average lending rate and the 1M ROBOR, the loan covenants and the maximum maturity exhibited a marginal easing. Loan demand contracted overall in 2014 Q3, amid the decline in demand for shortand long-term loans from the SMEs and for short-term loans from large companies. For 2014 Q4, credit institutions forecast an overall reduction in loan demand, following weaker loan demand from large companies. Industry-specific risks further posted mixed developments. In terms of company size, the credit risk associated with microenterprises was the only one perceived to increase, while for all the other loan categories risks remained unchanged from the previous quarter. 1 See also the Annex and the Methodological Notes for issues related to the particulars and terminology used herein. 2/15

3 B. Households Credit standards remained unchanged for the loans to households for house and land purchase, as well as for consumer credit in 2014 Q3. For 2014 Q4, banks envisage relaxing their credit standards for both loan types. Credit terms and conditions were marginally relaxed for real-estate loans (by cutting the spread between the average lending rate and 1M ROBOR), but stayed flat for consumer credit. Loan demand exhibited mixed developments in 2014 Q3: demand for real-estate loans increased, but shrank for consumer credit. For 2014 Q4, banks expect the demand for real-estate loans to remain unchanged and that for consumer credit to expand marginally. 3/15

4 Net percentage (%) A. Lending to non-financial corporations A1. Credit standards Overall, banks relaxed moderately their credit standards in 2014 Q3, in line with their previous expectations. For 2014 Q4, credit institutions continue to expect a marginal easing in lending conditions (Chart 1). Chart 1. Changes in companies credit standards Actual values Expected values Romania Euro zone Total companies Large companies, shortterm loans Large companies, long term loans SMEs, short term loans SMEs, long term loans Note: - Net percentage positive values indicate a tightening of lending standards - expected values reflect both lending standards and credit terms Source: ECB, The Euro Area Bank Lending Survey, October 2014 Loan breakdown shows that credit standards were eased moderately, regardless of company size or loan maturity. Looking ahead to 2014 Q4, credit institutions anticipate a continued slight easing of lending conditions for all loan categories. In 2014 Q3, euro area credit institutions reported, for the second successive quarter, an easing of credit standards applicable to loans to enterprises (net percentage of -2 percent compared with -3 percent in the previous quarter). The chief determinants of this evolution were banks lower cost of funds and less tight balance sheet constraints. For 2014 Q4, euro area credit institutions foresee a marginal easing of lending conditions. Overall, in 2014 Q3, the main driver behind the moderate easing of credit standards referred to domestic credit institutions lending policy (Chart 2). The loan breakdown however indicates that, in the case of large companies, lending conditions were also influenced by the NBR s monetary policy decisions and prudential measures, the industry-specific risk, and the risk on collateral demanded. 4/15

5 Chart 2. Factors which contributed to changes in lending standards (net percentage) F1 F2 F3 F4 F5 F6 F11 F1 - Current or expected costs related to your bank's capital position F2 - NBR's monetary and prudential policy decisions F3 - Expectations regarding general economic activity F4 - Industry specific risk F5 - Ratio of non-performing loans in bank portfolio F6 - Risk on collateral/guarantee demanded Note: - Net percentage positive values indicate a tightening of lending standards - factors F7, F8, F9 and F10 have not changed F7 - Risk of an asset price bubble in the real estate market F8 - Competition from other banks F9 - Competition from non-banks F10 - Competition from market financing (capital market, shareholding etc.) F11 - Other factors A2. Credit terms and conditions As for the change in credit terms and conditions, in 2014 Q3 banks moved to ease their collateral requirements moderately, while the spread between average lending rate and 1M ROBOR, the loan covenants and the maximum maturity saw a marginal easing. The other contractual terms were left broadly unchanged (Chart 3). The LTV (loan-to-value) ratio for the largely mortgage-backed loans in credit institutions portfolio in 2014 Q3 neared 90 percent, pointing to an improvement against the previous quarter when it stood at approximately 100 percent. During 2014 Q3, banks estimated a loss given default (LGD 2 ) for the defaulted loans 3 of about 58 percent 4. 2 The information regarding LGD for the loans to companies and households should be interpreted with caution, considering: (i) the short data series available to banks for quantifying this indicator and (ii) banks work-in-progress methodologies for LGD calculation. 3 Default is defined pursuant to NBR Regulation No. 5/ LGD is rising compared with the prior quarter (48 percent), driven by banks stepped-up efforts to clean up their balance sheets, these values reflecting market risk better than in the previous quarters when no significant risk events were observed. 5/15

6 Net percentage (%) Chart 3. Changes in credit terms (net percentage) F1 - The bank`s margin on average loans to ROBOR 1M F2 - Risk premium F3 - Maximum size of the loan or credit line F4 - Collateral requirements F5 - Contract terms F6 - Maximum maturity F7 - Costs of lending, other than interest rate charges (commissions, etc.) -40 F1 F2 F3 F4 F5 F6 F7 Note: - Net percentage positive values indicate a tightening of lending standards A3. Loan demand Overall, in 2014 Q3, banks reported a moderate decline in loan demand from non-financial corporations (Chart 4), reflecting a broad-based evolution in terms of loan breakdown. The only component posting a slight advance was the large companies demand for long-term loans. For 2014 Q4, credit institutions envisage a decrease in loan demand on the whole, amid weaker demand for short- and long-term loans from large companies, while demand for loans from small- and medium-sized companies is expected to increase, regardless of maturity. A4. Credit risk associated with lending to non-financial corporations In banks opinion, industry-specific risks further painted a mixed picture in 2014 Q3, compared with 2014 Q2 (Chart 5). In agriculture, construction, real estate, tourism and financial intermediation risks were perceived as rising, whilst the only sector for which banks perceived a lower credit risk than in the previous quarter was the energy sector. 6/15

7 Net percentage (%) Net percentage (%) Chart 4. Loan demand (net percentage) Actual values Expected values Total companies Large companies, short-term loans Large companies, long term loans Note: - Net percentage positive values indicate an increase in loan demand SMEs, short term loans SMEs, long term loans Chart 5. Industry specific credit risk evolution (net percentage) Agriculture & Fishery Industry Energy Construction Trade Tourism Transport, Financial comunication, intermediation postal services Note: - Net percentage positive values indicate an increase in credit risk Real estate Other services 7/15

8 Net percentage (%) By company size, the only category for which banks perceived a rising credit risk in 2014 Q3 was that of microenterprises, albeit at a slower pace than in the prior quarter (Chart 6). On the other hand, credit risk associated with lending to other company categories remained unchanged. Chart 6. Credit risk evolution, by company size (net percentage) SMEs Microenterprises Small enterprises Medium enterprises Corporations Note: - Net percentage positive values indicate an increase in credit risk 8/15

9 B. Lending to households B1. Credit standards In 2014 Q3, credit standards remained unchanged for both real-estate loans and consumer credit (Chart 7). Chart 7. Changes in credit standards for households (net percentage) Note: - positive values of the net percentage indicate tightening credit standards; - expected values refer to both credit standards and credit terms and conditions. Source: ECB, The Euro Area Bank Lending Survey, October 2014 For comparison reasons, in the euro area credit institutions continued the trend recorded over the last two quarters and eased slightly the lending conditions for both real-estate loans and consumer credit. The main factors behind this evolution were the improvement in banks funding conditions and competitive pressures. In the short run (2014 Q4), banks in the euro area expect credit standards to further ease marginally, irrespective of the loan category. For 2014 Q4, local banks forecast a moderate easing of credit standards for loans for house and land purchase, as well as a marginal relaxation for consumer credit. B2. Particulars of real-estate loans (house and land purchase) In 2014 Q3, the factors behind the change in credit standards for real-estate loans remained constant (Chart 8). 9/15

10 Chart 8. Factors behind the change in credit standards (net percentage) F1 The current or expected capital position of the bank F4 Expectations on real-estate market (change in the probability of a steep increase/decrease in house prices) F2 NBR s monetary policy decisions and prudential measures F3 Expectations regarding the general economic activity F5 Changes in the share of non-performing housing loans in the bank s portfolio F6 Pressure from bank competition F7 Pressure from non-bank competition Note: positive values of the net percentage indicate tightening credit standards (i) Credit terms and conditions In 2014 Q3, in the case of real-estate loans, banks eased moderately the spread between the average lending rate and 1M ROBOR, keeping unchanged the other credit terms and conditions (Chart 9). In 2014 Q3, the average loan-to-value ratio recorded by new loans granted over the last three months stood at 81 percent, i.e. the same level as in 2014 Q2 (Chart 10). The average LTV ratio for the total real-estate loan stock came in at 85 percent, slightly below that in the previous quarter (86 percent) (Chart 11). 10/15

11 Chart 9. Real-estate credit terms and conditions (net percentage) F1 Spread between average lending rate and 1M ROBOR F2 Maximum LTV (loan amount to collateral value) F3 Maximum DTI (monthly debt service to monthly income) F4 Maximum maturity F5 Lending costs other than interest (charges, etc.) Note: positive values of the net percentage indicate tightening credit terms and conditions In 2014 Q3, the average indebtedness remained relatively unchanged from the previous quarter. Average indebtedness stood at around 45 percent for new real-estate loans (Chart 12) and at around 49 percent for the total real-estate loan portfolio (Chart 13). Chart 10. LTV bank average and the variation band for new loans granted in the quarter under review across the banking sector Chart 11. LTV bank average and the variation band for total loans granted across the banking sector 11/15

12 Chart 12. Indebtedness bank average and the variation band for new loans granted in the quarter under review across the banking sector Chart 13. Indebtedness bank average and the variation band for total loans granted across the banking sector (ii) Real-estate loan demand and housing prices The real-estate loan demand rose significantly in 2014 Q3 (Chart 15), the same as in the previous quarter. However, banks expect the real-estate loan demand to remain steady in the following quarter (2014 Q4). Chart 14. Housing price developments according to banks assessments (net percentage) According to credit institutions, the downward trend in housing prices persisted in 2014 Q3 too (Chart 14), with a similar evolution being expected for 2014 Q4. Note: positive values of the net percentage indicate an increase in housing prices 12/15

13 Chart 15. Changes in loan demand (net percentage) Note: positive values of the net percentage indicate an increase in the loan demand B3. Consumer credit particulars In 2014 Q3, the factors behind the change in the consumer credit standards remained constant (Chart 16). Chart 16. Factors behind the change in credit standards (net percentage) F1 The current or expected capital position of the bank F2 NBR s monetary policy decisions and prudential measures F3 Expectations regarding the general economic activity F4 Expectations on real-estate market (change in the probability of a steep increase/decrease in house prices) F5 Changes in the share of non-performing housing loans in the bank s portfolio F6 Pressure from bank competition F7 Pressure from non-bank competition Note: positive values of the net percentage indicate tightening credit standards 13/15

14 (i) Credit terms and conditions In 2014 Q3, according to credit institutions, consumer credit terms and conditions faced no significant changes (Chart 17). Chart 17. Consumer credit terms and conditions (net percentage) F1 Spread between average lending rate and 1M ROBOR F2 F3 F4 F5 Minimum down payment Maximum DTI (monthly debt service to monthly income) Maximum maturity Maximum loan amount F6 Lending costs other than interest (charges, etc.) F7 Other Note: positive values of the net percentage indicate tightening credit terms and conditions (ii) Consumer credit demand In 2014 Q3, the demand for consumer credit posted a decrease at the aggregate level. Both the demand for mortgage-backed consumer credit and that for credit cards fell moderately versus the previous quarter (Chart 14). In the near run (2014 Q4), banks forecast a marginal increase in the demand for consumer credit, at the aggregate level, and for credit cards, while expecting a steady demand for mortgage-backed consumer credit. B4. Loss given default (LGD 5 ) In 2014 Q3, at the aggregate level, the average loss given default (LGD) for defaulted loans to households 6 was of around 68 percent. LGD for mortgage-backed consumer credit and for non-mortgage backed consumer credit stood at around 76 percent and 79 percent respectively, while LGD for real-estate loans and credit cards came in at approximately 48 percent and 58 percent 7 respectively. 5 The information on LGD should be interpreted with caution, considering: (i) the short data series available to banks for quantifying this indicator and (ii) banks work-in-progress methodologies for LGD calculation. 6 Default is defined according to NBR Regulation No. 5/ LGD values in 2014 Q3 are significantly higher than in the previous quarter (41 percent at an aggregate level, 24 percent for real-estate loans and 46 percent for mortgage-backed consumer credit) as a result of banks stronger efforts to clean their balance sheets, better reflecting the market risk compared to the previous periods when no such notable actions were recorded. 14/15

15 Annex The survey is conducted on a quarterly basis by the NBR in January, April, July and October. It is based on a questionnaire (released as part of the May 2008 analysis) which is sent to the top 10 banks. These banks were selected based on their market share in terms of loans to companies and households, accounting for approximately 80 percent of the loan stock. The questionnaire has two sections, tracking separately the characteristics of loans to: (A) non-financial corporations and (B) households. The questions focus on banks opinions regarding: credit standards (internal credit regulations or criteria governing credit institutions lending policy); credit terms and conditions (loan covenants set up by lenders and borrowers in the loan agreement such as interest rate, collateral, maturity, etc.); risks associated with lending; loan demand; and other specific details (expectations regarding the average house price per square meter, debt service to household income, loan-to-value ratio, etc.). Responses are analysed in terms of net percentage. With respect to credit standards, the net percentage is the difference between the share of banks reporting tightening credit standards and that of banks reporting an easing thereof. A positive net percentage shows that a larger proportion of banks tightened credit standards (net tightening), whereas a negative net percentage indicates that a larger proportion of banks eased them (net easing). As for loan demand, the net percentage is the difference between the share of banks reporting an increase in loan demand and the share of banks reporting a decline. A positive net percentage shows that a larger proportion of banks reported an increase in loan demand, whereas a negative net percentage indicates that a larger proportion of banks reported a decline in loan demand. The net percentage is computed by taking into account the respondent banks market share. All other responses are treated in a similar manner. Positive values of the net percentage are explained in the chart notes. The survey covers the opinions regarding developments over the past three months and expectations over the next three months. 15/15