Corporations to have it easier in Q4

Though banks in the third quarter of 2005 halted their trend this year of making it easier for small and medium-size enterprises (SMEs) to gain loans, lenders are expected to go back to relaxing their lending policies for all businesses during this quarter of the year. According to a National Bank of Poland (NBP) report on Polish banks' loan policies, the most significant easing in loan policy is anticipated in the corporate sector.

"In the fourth quarter of 2005 the net percentage which represents the strengthening of the trend regarding changes in the lending policy towards the [corporate] sector reached the highest value since the survey was first conducted," the central bank's report states.

Banks that are changing their lending policies reported that the main reasons for this were: "[I]ncreased competitive pressure, particularly from other banks, and a change in demand for loans to corporations." Other motives included reduction in risk related to the expected general economic situation in the country as well as a decreased share of irregular loans in the banks' loan portfolios.

Sagging demand

Although banks noted an increase in demand for corporate loans in the third quarter, the growth was slower than in the second quarter of the year. Only the demand for long-term loans for SMEs grew at a faster rate than in previous quarters. "The factors which contributed to the growth in demand were an increase in the need for financing investments as well as financing inventories and working capital," the report states. Marketing campaigns were also credited for stimulating loan demand among SMEs.

As for this quarter of 2005, the banks surveyed expect a rapid rise in corporate demand for loans. The report finds this will mainly be due to the anticipated leap in demand for long-term loans among corporations.

The report also found that in the household sector, the demand for loans continued to grow, although the rate of growth fell significantly in the third quarter, after a experiencing an all-time high increase in demand in Q2. The consumer loans sector reported a negative growth rate for the first time. A drop in financing needs for consumer durables and a deterioration in households' financial situations were blamed for this decline. However, banks surveyed think that the drop was only temporary, as an increase in demand is expected in the last quarter of 2005.

The NBP's report was based on a survey conducted in September and October. Altogether, the banks surveyed represent a share of  more than 79 percent of the loan market for companies and households.