Comment of Director of NBK Financial Stability and Research Department Olzhas Kubenbayev

According to the results of a banks` lending survey for the 3^rd quarter of 2021, demand for corporate loans varied in different directions.

Banks continued active lending to small and micro-businesses in a segment of unsecured loans issued based on results of scoring models. Number of received loan requests in the 3^rd quarter surged by 43% quarter-on-quarter and reached a new peak of 221,000 requests, while an average request size rose by 1.5 times quarter-on-quarter (hereinafter ‘q/q’) to 21 million KZT.

In majority of banks, demand for loans to medium-sized enterprises remained at the level of the previous quarter. Along with that, individual banks actively offered medium-sized businesses short unsecured loans provided based on scoring results. As a result, number of received loan applications in 3^rd quarter soared by 27% q/q to 1.3 thousand applications, and an average application size plummeted by 59% q/q to 512 million KZT.

As for major enterprise, during the last two quarters, demand for loans noticeably shrank due to their slow recovery after the pandemic and release of pent-up demand at the beginning of the year. Average number of applications received for the quarter in 2021 (239 applications) remains at the level of 2020 but it is still 28% below the 2019 level. Nevertheless, average application size of large borrowers in the 3^rd quarter reached the pre-pandemic level, making 7 billion KZT.

Ratios of loan request approval fell q/q in all business segments, while credit conditions for SMEs somewhat eased. Large banks have revised their risk levels for certain business sectors in anticipation of economic growth in the near future.

In the next quarter, banks expect continued growth in demand for loans from small and medium-sized businesses. Along with that, according to lending conditions, in most cases, no changes are expected.

Increased spending on durable goods by population and conduction of marketing campaigns by large banks led to a significant increase in the demand for secured and unsecured consumer lending in the 3^rd quarter. Competition for the best quality clients contributed to a loosening of credit conditions in terms of reducing requirements for solvency of customers, increasing a credit limit size and decreasing interest rates. Number of received applications for secured and unsecured loans rose by 33% and 8%, respectively.

Banks explain decreased demand for car loans in the 3^rd quarter by a lack of new cars in showrooms as well as suspension of the Development Bank of Kazakhstan JSC preferential program for car loans. Conditions for issued car loans were loosened in terms of credit scoring threshold extension and lowering interest rates. Despite an increase by 10% in the number of received applications during the reporting quarter, share of their approval remained at the level of the previous quarter.

As for mortgage lending, according to banks, declining demand in the 3^rd quarter is related to the deadline of accepting requests for the state mortgage lending program Baspana-Hit, as well as to high prices in the real estate market. Compared to the previous quarter, number of received mortgage apllications rose by 27%, but share of their approval fell by 17%. Despite loosening conditions of mortgage lending in terms of easing requirements for collateral, lowering interest rates, decreasing commissions and revising a minimum initial payment by most banks, introduction of a scoring system by individual banks to assess creditworthiness of customers led to a decrease in the share of loan approvals.

During the next quarter, a bulk of banks plan to loosen lending conditions in all the segments of retail lending, so they expect an increasing demand for secured and unsecured consumer loans as well as for car loans. According to the banks` representatives, demand for mortgage will remain at the level of the current quarter.

Banks` lending survey for the 3^rd quarter of 2021 has covered 20 second-tier banks. The survey is conducted by the National Bank on a quarterly basis to assess changes in supply and demand of credit resources.