Private sector loans expand by 2.1% y/y in Hungary

The stock of outstanding bank loans to the private sector rose by 2.1% y/y at end-April, the National Bank of Hungary (NBH) reported. Lending growth accelerated visibly from the previous month and maintained a consistent upward trend since Oct 2016. The pick-up in lending growth was on account of both household and corporate loans, but the corporate lending recovery was more visible.

The growth of corporate loans accelerated to 3.5% y/y in April and it also showed a pronounced recovery in real- and transaction-based terms as well. Corporate lending continued to improve despite the expiration of the Funding for Growth Scheme (FGS) at the end of the previous month, which we see as positive signal regarding the pick-up in market-based lending. New corporate loans amounted to seasonally-adjusted, net HUF 130.6bn in terms of transactions in April, which was the highest monthly volumes in the post-crisis period. The new corporate borrowing was entirely in forex currency during the month, possibly as forint loan interest rates inched up slightly, which we think could reflect the FGS expiry.

The contraction in household lending almost halted in April as the stock of household loans fell by just 0.1% y/y. In real- and transaction-based terms, household lending was down by 0.9% y/y and also showed a mild and gradual recovery. Households borrowed net HUF 8.8bn of new loans in seasonally-adjusted terms and net borrowing of the sector has been generally positive since the beginning of the year, compared to the high net repayments in Jan-Apr 2016. Retail loan interest rates remained on a downward trend in April with the exception of some uptick in rates on general purpose mortgage loans. Mortgage loan rates, however, might be expected to decline in H2 due to the introduction of the consumer-friendly housing loan certificate by the NBH, in our view.

Money supply growth accelerated noticeably in April. The narrowest monetary aggregate, M1, rose by 26.6% y/y, in our opinion partly reflecting the pick-up in inflation as well. The annualized growth of the adjusted money supply data was quite strong as well, which we take as a signal that the strong economic growth momentum in Q1 was likely carried into Q2 as well.

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