OREANDA-NEWS. November 13, 2015. According to the assessment of commercial banks, the financial status of residents and of the majority of the economic activities is improving — the survey of banks, initiated by the Bank of Lithuania, reveals that banks plan to increase loan portfolios moderately.

“Bank expectations to increase lending moderately show that banks expect a healthy development of the whole economy and credit market. Interestingly, smaller market participants, which expect to grow the loan portfolio faster, intend to increase competition for the largest banks,” said Tomas Garbaravi?ius, Member of the Board of the Bank of Lithuania.

Projections for change in the banks’ loan portfolio

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The largest banks plan to increase loan portfolios by up to 5 per cent; however, smaller loan market participants predict a growth of more than 15 per cent.

Three out of ten surveyed banks expect that the demand for loans to enterprises will grow over the last quarter of this year.

According to commercial banks, enterprises’ plans to borrow are mainly affected by the growing need to invest and expand manufacturing and capacities, as well as the increasing demand for working balances and loan restructuring.

Commercial banks saw that the majority of economic activities had positive financial statuses; however, they lent more cautiously to certain sectors involving higher risk. For example, four out of ten banks indicated that they lent more cautiously to enterprises engaged in real estate. Two banks lent more cautiously to enterprises engaged in transport, hotel and restaurant business.

While assessing the trends in resident borrowing, banks indicated that they expect the consumer loan portfolio to grow. Low interest rates and the growing demand for hard goods, such as vehicles or domestic appliances, had an impact on this. Five out of ten banks indicated that the consumer loan portfolio would grow by up to 5 per cent in 2016, further four banks — by more than 5 per cent.

Four out of seven banks providing loans for house purchase indicated that, over the last quarter, the demand for loans for house purchase had increased due to regulatory changes. The surveyed banks expect that the demand for such loans will reduce slightly over the fourth quarter of this year.

The amendments to the Responsible Lending Regulations, which decrease the risk of the over-indebtedness of residents, came into force as of 1 November 2015.

Bank surveys are conducted in order to obtain information on non-interest related lending conditions as applied by financial institutions, their borrowing costs and market expectations. For the Review of the Bank Lending Survey go to the Bank of Lithuania website.