Lending activity picks up further in Hungary

The stock of outstanding bank loans increased by 4.7% y/y as of end-October and the growth picked up further compared to the 4.0% y/y growth in the previous month, the National Bank of Hungary (NBH) reported. The pick-up seemed mainly on account of corporate lending while household loan growth slowed down slightly. There were similar loan dynamics in terms of real loan growth based on transactions. Lending to non-financial companies accelerated due to increased forint lending while retail lending growth moderated slightly but still remained generally stable for the past five months.

New corporate borrowing amounted to HUF49.1bn in terms of transactions in October. This represented entirely forint borrowing while there were net repayments of forex loans during the month. Corporate borrowing in October was generally in line with the average amounts for the past twelve months. Forint loan interest rates were stable for large loans in October and continued to decline in the case of small-sized loans. Conversely, interest rates on EUR-denominated loans increased noticeably for large loans and remained stable for small loans.

New retail lending was negative at HUF14.3bn in October due to net repayments of forint loans. This was the first month with net repayments of retail loans since February. Retail loan interest rates generally continued to fall during the month with the downward trend being more pronounced in the case of housing loans. We think that the data still does not indicate actual slowdown in retail borrowing as we expect households to remain net borrowers in the next months, supported by low interest rates and continued strong demand for housing.

Money supply growth remained generally stable in October. The narrowest monetary aggregate rose by 26.8% y/y during the month with a very slight upward trend visible as of September. Together with the disinflation in the past couple of months, we believe that the data suggests positive outlook for the economic growth momentum in Q4.

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