What will be the real picture of lending to businesses and individuals in late 2014 – early 2015?
Lending to what borrowers will banks be focused on in the forthcoming months: corporate clients or individuals? What is the situation with lending today? In what ways can lending be developed? Prostobiz.ua asked the experts
Olexiy Volchkov, FUIB’s Deputy Chairman of the Board
There are several factors determining the situation in the credit market.
First, this is the availability of bank resources for lending. Since the beginning of this year there is a significant outflow of funds from deposits, both of legal entities and of individuals, which was partially covered by the NBU refinancing. The National Bank of Ukraine "poured" near 152 billion UAH into the financial system of Ukraine from the beginning of the year. As shown by the recent months’ trend, the NBU refinancing at the moment is almost the only source of resources replenishment for banks lending.
Here comes the conclusion that only lending in hryvnia and only for a short period (up to 3 months) is possible, since all liabilities, including the NBU refinancing, do not exceed the period of 3 months. However, businesses need funding for a year or more for the economy to function in an ordinary way and it is next to impossible to realize this concept with the current maturity of the resources involved.
Speaking about businesses that need loans for up to 3 months, it is primarily about the organizations (wholesale and retail) that sell quick-return goods, that is food, consumer goods, pharmaceuticals, and fuel.
Another solution allowing at least to partially neutralize the lack of medium- and long-term resources are non-cash instruments (guarantees, bills, letters of credit), which allow companies to raise a trade loan.
The second determining factor is the high level of risks. Due to the significant slowdown in the economy and hryvnia devaluation income earned by most companies is insufficient for payment not only of principal, but interests. The same trend is observed for individuals. Therefore, even if banks have funds available, it is not so easy to find the creditworthy borrower.
The third factor influencing lending is the cost of resources. Liabilities deficit has led to substantial increase in the cost, which, in its turn, caused the banks (both Ukrainian and foreign) to raise prices for loans.
Such cost made investment lending almost impracticable for companies and mortgage and loans for cars for individuals. That is why speaking about individuals, only short-term consumer loans develop, although their growth rate has declined significantly. When it comes to legal entities, only companies with very low loan debt can afford such lending. And this fact also narrows the range of potential borrowers.
If we talk about the future, then the financial sector surely expects the resources to become longer due to the return of individuals deposits and possible increase in the NBU refinancing term, at least for a year. In this case, agriculture may become the most promising industry in terms of development, and other export-oriented industries, as well as the production of goods out of the Ukrainian raw materials that can compete with imports.
However, for this to become a reality at least a few liabilities sources (individuals, legal entities, banks, the National Bank of Ukraine, and the international financial institutions) must activate. At the moment, only the NBU functions among all sources. The stabilization of the macroeconomic situation in the country should induce changes in the mood of people who have traditionally been the main source of cash resources. Legal entities will catch up the population and then a general rise in the country's rating will lead foreign financial institutions to us, which can provide long-term (3-7 years) resources, so necessary for the modernization of enterprises and the development of the country's infrastructure.