The stock of private sector loans fell by 4.7% y/y as of end-October, the National Bank of Hungary (NBH) reported. The loan stock dynamics has remained generally stable in the past five months as a general upward trend in retail loans was countered by stronger decline in corporate loans. We think that the decline in the corporate loan stock was mainly on account of ongoing bad loan clean-up efforts by banks.
Otherwise, transaction-based corporate lending growth was positive in real terms in Jun-Sep, in our opinion suggesting gradual improvement in corporate borrowing demand. Transaction-based real corporate loans fell by 3.2% y/y in October but we think this might be due to one-off large maturities and we still expect corporate lending to remain positive going forward, supported by the NBH’s lending programs and the low interest rate environment. Interest rates on corporate forint loans declined in October while there was some noticeable increase in interest rates on small EUR-denominated corporate loans.
Real, transaction-based retail lending fell by 3.1% y/y in October. Retail lending has also been stable in the past few months, based on transaction terms. We think it showed some moderate recovery but still quite gradual, possibly stimulated mainly by the government’s housing program. Households borrowed net HUF10.7bn of bank loans in October. Interest rates on all types of retail loans continued to decline during the month.
Money supply, measured by the narrowest M1 aggregate, picked up slightly to 18.5% y/y in October. Supply growth was generally stable in Aug-Oct while the wider M2 and M3 aggregates exhibited gradual downward trend. In seasonally-adjusted terms, the annualized growth trend showed some improvement in the past couple of months in terms of all aggregates but we consider it too early to conclude improving economic growth prospects for Q4.