Commentary by Olzhas Kubenbayev, Director of the Financial Stability and Research Department of the National Bank of Kazakhstan

Lending to large, medium and small enterprises

According to findings of the survey in the 3rd quarter, despite a continued growth in the cost of credit resources in individual banks, demand for loans from small and medium-sized enterprises slightly increased, while for large enterprises it remained stable.

Increase in demand for loans from small enterprises was reported mainly in large banks. Total number of loan applications received in the reporting quarter soared by 35% quarter-on-quarter (hereinafter – q/q) to 417 ths and an average size of a application grew by 11% q/q to 25.9 mln KZT. Large banks attribute the inflow of loan applications and increase of their average size in the reporting quarter to allocation of funds under government program «National Project for Entrepreneurship Development in years 2021-2025». The growing number of application is also related with development of existing or launch of new credit scoring products.

Demand from medium-sized enterprises for loans following results of the reporting quarter was positive. Thus, number of loan applications rose by 12% q/q to 4.4 ths, while the average size of applications fell by 5% to 251 mln KZT. Similarly to small businesses, the major growth in the number of application from medium-sized enterprises accounts for unsecured loan products.

In most banks, demand from large businesses has not changed, but there is a decrease in the number of loan applications due to seasonal factors. As a result, total number of loan applications decreased by 23% q/q to 156, while size of an average application decreased by 23% to 5.8 bln KZT. Approval rates for small and large business loan applications rose, mainly in large banks, to 40% and 58%, respectively. Along with that, share of approvals for medium-sized enterprises for loans slightly contracted and reached 48%.

Some banks highlight tightening of lending conditions associated with a slight increase in interest rates, an increase in margins and a reduction in maximum maturities for some loan products. Interest rates rose in the reporting quarter, mainly in the large business segment.

In the next quarter, according to large banks, demand for loans from small and medium-sized enterprises will be negative, as banks plan a hike of interest rates on loans. At the same time, some banks expect a slight increase in demand from large businesses due to a potential increase in the number of large borrowers in the market.

Mortgage and consumer lending, car loans

Demand for retail loans in the 3rd quarter expanded in the segments of mortgage and consumer lending, while for car loans it contracted slightly.

Banks report that the increase in demand for mortgage loans in the reporting quarter is associated with the season for commissioning residential facilities. However, number of received applications for mortgage loans fell from 258 ths to 183 ths applications, which is attributed to return of demand to previous levels after its jump in the 2nd quarter in a particular bank. It should be noted that this decrease did not affect the increase in the overall demand indicator. Meanwhile, there were no significant changes in conditions of mortgage lending, and share of approval for it remained at the level of previous quarters (38%).

Along with this, some banks associate the growing demand for consumer loans with higher consumer spending on durable goods, while others attribute this to banks’ marketing actions and campaigns. Thus, in the reporting quarter, number of applications for secured and unsecured consumer loans went up by 15.3% q/q and 10.3% q/q, respectively. In turn, in conditions of consumer lending, requirements for collateral for secured loans were eased, and in the segment of unsecured loans, requirements for customer solvency were tightened, while the limits and repayment periods of loans were increased.

Decrease in the demand for car loans in the reporting quarter was due to continued delay in deliveries of cars to showrooms. Moreover, one of the large banks increased interest rates on car loans, which also affected the diminution in demand. Thus, in the reporting quarter, the share of refusals on car loan applications remained at the level of 88%, similar to the previous quarter.

In the 4th quarter, banks expect an increase in demand for both unsecured and secured consumer loans, as well as tightening of conditions in the mortgage lending.

19 second-tier banks participated in the Banks’ on lending survey of for Q3 2022. The National Bank carries out the survey on a quarterly basis in order to evaluate changes in demand and supply of credit resources.