Loan market recovering slowly

After the development of previous years, the loan market dramatically declined. Global crisis narrowed down resources, entailing a lending activity contracted to the minimum; at the same time interest rates skyrocketed. Customer interest rates of Forint and Euro based loans increased significantly since September 2008 and most banks stopped lending in Swiss franc, due to the national currency’s volatility. Foreign parent banks do not increase the financing level of their affiliates and drastically limit risk-based capital investment. Lending conditions have become much stricter and this is especially detrimental to company lending activity, which is characterised by lower margins. How do banking experts view the current situation? Balázs Szabó, managing director of MKB Bank’s wholesale business management section and László Gyöngyössy, the sales director of Citibank’s SME services answered our questions. Q: – What is your lending practice is now? How did risk assessment practices change? B.SZ. (MKB): – In the last twelve months MKB focused on managing the existing stock, acquisitions were of lesser importance than before the crisis. Risk assessment principles did not change, the worsening of the economic environment manifested in the results of assessments. L.GY. (Citibank): – Financing needs of SMEs shifted towards short term financing in the past year, demand for investment loans fell significantly. Our customers focus on strengthening their liquidity. At the same time, our lending activity is more active than in 2008, because we offer loans with fewer restrictions than our competitors do. Q: – New products resulted from the crisis, how successful were these? B.SZ. (MKB): – Products themselves cannot solve the problems of enterprises. Therefore, measures launched due to the crisis form only a small part of new loan solutions: what enterprises need is tailor-made loan management. This year we expanded our services by joining several state programmes and made certain services more flexible. L.GY. (Citibank): – During the crisis, loans registered and paid off in foreign exchange became more popular, since other banks retreated in this field. We developed an on-line foreign exchange risk assessment system, by the use of which our customers are capable of realising the best instant conversions. Q: – Do you agree with Hungarian enterprises saying that interest rates are too high? B.SZ. (MKB): – Interest rates of loans in Forint were high in the first half of the year, because of bank resources becoming too expensive and an increase in Budapest interbank offered rates. L.GY. (Citibank): – The crisis did entail an increase in interest rates for SMEs, both in Forint and foreign exchange. Citibank opted for only a moderate increase. Q: – What kind of new loan products will you come out with? B.SZ. (MKB): – In the near future, several new solutions will come out which target medium sized companies. Gy. L. (Citibank): – Our selection of loans is so wide that there is no need for new solutions at the moment. Q: – How do you assess the past nine months? B.SZ. (MKB): – It is difficult to say positive things about a crisis, but my feeling is that we managed to solve the real problems of both MKB Bank and our customers. However, the crisis does bring out the structural problems of our clients; if these problems are solved, these enterprises will be more competitive and innovative after the crisis. Gy. L. (Citibank): – It was successful in the SME business segment, because the number of our customers significantly increased and our lending activity improved.