VILNIUS - The latest survey of banks and businesses by the Economics Department of the Bank of Lithuania has revealed a possible growth of loan portfolios and less stringent lending requirements in the next six months, though there is still much controversy regarding the recovery of some sectors of the economy, reports ELTA.
The October survey respondents reported a slight easing of short-term lending requirements by banks in the most recent six months, while only one bank reported having done so for long-term loans. Banks said they eased requirements for the loan-to-value ratio, but tightened assessment of the collateral quality.
“A more conservative approach has been determined by uncertainty surrounding the government debt problems and other market stimuli in recent months, which also contained the recovery of the bank and customer expectations. Not surprisingly, the forecast by financial institutions was more pessimistic, not only because of the real estate market activity, but also because of housing prices. Banks, however, expect the lending requirements to ease gradually in the nearest six months and the gross value of loan portfolio to grow by 1 to 5 percent in 2012,” Kristina Grigaite, a senior economist of Financial Stability Unit of the Bank of Lithuania Economics Department said.
The survey has revealed that almost 60 percent of respondent banks’ representatives holding senior management positions do not expect any real estate price growth and postpone the market recovery until the end of 2012. It was during the spring survey that some banks had forecast the stagnation in the real estate market to end this year and real estate prices to increase by around 10 percent.
Banks also reported having applied to their average risk customers this year a maximum loan-to-value ratio equal to 70 to 75 percent, which complies with good practice in risk assessment. Next year, as revealed by the survey, banks intend to ease down-payment requirements by applying a loan-to-value ratio in the 75-80 percent range. This ratio would be more stringent than the 85 percent limit established by the Bank of Lithuania’s Responsible Lending Regulations.
Regarding the corporate sector, “Although businesses say the lending requirements have tightened in the recent six months, they do not consider the bank crediting policy a major obstacle for their operations, since three-fourths of the surveyed businesses intend to use internal finances to fund their activities. It must be noted, however, that enterprises with business development plans for the nearest six months plan to get from banks at least one-fifth of the funding needed,” Virgilijus Rutkauskas, a senior economist of the Financial Stability Unit said to summarize the survey results.
The tax burden and increased production expenses have been reported by businesses to be the biggest obstacles for their activities in the nearest months, the central bank said.