The stock of private sector loans increased by 5.2% y/y as of end-January, accelerating from the 4.2% y/y growth in the previous month, monetary data by the National Bank of Hungary (NBH) showed. In general, however, loan growth has rather stabilized in the past four months with no signs of further recovery. It should be noted though that the subdued loan growth has been partly attributed to sale of bad loans by banks. The underlying trend of lending growth has appeared to be also stable due to diverging development of retail and corporate lending. Corporate lending has maintained its upward trend, in our opinion partly supported by the NBH lending schemes. In contrast, retail lending has stalled in the past few months.
Corporate lending was up by 8.6% y/y in real, transaction-based terms in January. It continued to improve, also stimulated by low interest rate, in our view. Non-financial companies were net new loan borrowers to the amount of HUF6.5bn during the month, entirely representing new forint loans. The emphasis on forint borrowing was likely on account of rising interest rates on euro loans in January. The interest rate on forint loans declined in the case of large loans but rose slightly for smaller-sized loans.
The real growth of retail lending also picked up slightly to 0.6% y/y in January but has overall trended on the downside in the past four months. Households borrowed net HUF4.9bn of new bank loans in the month, which we consider a relatively low amount after the surge in new borrowing in Q2-Q3/2017. The slowdown was entirely related to other retail lending while consumer and housing loans have maintained a relatively strong trend. Interest rates on retail loans have also started to inch up in January, possibly following global financial market trends.
Money supply growth accelerated noticeably in January but its growth was still considerably weaker than a couple of months ago, especially in the case of the narrowest M1 aggregate. We consider this to be due to expiring low base effects, possibly related to the pace of EU fund absorption. Seasonally-adjusted annualized growth of money supply suggested that the underlying pace of economic activity remained quite strong in the beginning of the new year, in our view.