The stock of bank loans to the private sector expanded by 5.0% y/y as of end-November, according to data by the National Bank of Hungary (NBH). Loan growth accelerated compared to the 4.7% y/y increase in the previous month, which was entirely on account of retail lending. Loans to households rose by 2.5% y/y, noticeably better than the performance in the previous months. This reflected stronger growth in housing loans, possibly as the impact of the government’s new housing benefit programme started to kick in, in our view. Corporate loan growth slowed down to still strong 8.4% y/y in November.
In real, transaction-based terms, however, both retail and corporate lending moderated during the month. Retail lending rose by 0.4% y/y, which was the slowest growth since May. Households borrowed net HUF0.6bn of loans in November, significantly weaker than the average borrowing since the beginning of the year. Retail loan interest rates continued to trend down during the month so we think that the weakening of retail borrowing demand might be just temporary. Banks expected household demand for loans to continue to increase in Q1, according to a recent NBH survey.
Real, transaction-based corporate loan growth slowed down to still strong 6.9% y/y in November. The slowdown was on account of forint borrowing while forex loan growth picked up further, exhibiting a gradual upward trend since the beginning of the year. Non-financial companies borrowed net HUF80.4bn in the month, which we think can be considered a relatively large amount in view of the general trend from the past several months. All of the net borrowing represented forex loans, possibly stimulated by a sharp decline in the interest rate on large new EUR loans. The interest rates on HUF corporate loans also trended down in November.
Money supply growth remained largely stable in November. The narrowest M1 monetary aggregate expanded at a slightly higher pace of 27.0% y/y while the M2 aggregate slowed down marginally to 15.1% y/y. Seasonally-adjusted annualised growth decelerated but we still think that the data suggests healthy prospects for economic growth in Q4.