Ctrl bank lending scheme could halt drop of SME credit stock in two years, MNB official says

The Funding for Growth Scheme of the National Bank of Hungary (MNB) is expected to slow the drop of the loan stock of SMEs, and the contraction could halt in the next two years, director Balázs Vonnak said when introducing the bank's new quarterly report on lending processes on Thursday.
    The SME loan stock has been dropping yr/yr since the fourth quarter of 2008. Banks will grant SMEs loans at a maximum 2.5% interest rate on the back of 0% central bank refinancing under the MNB funding scheme, with HUF 425 billion available for forint loans and another HUF 325 billion on the conversion of FX loans into forints between June and August. The two combined reach 21% of the SME lending stock.
    Compared to the maximum lending rate - which equals to banks' spread - under the programme, the average spread on SMEs loans excluding overdrafts was little over 300bp for micro- and small businesses in the second half of 2012, with the spread varying between 236bp for the best quality debtors and 700bp for the worst, but sill creditworthy, debtors in the segment. The average spread on loans other than overdrafts for midsize companies was 235bp in the second half of 2012, ranging between 200bp and 475bp.
    The programme could significantly ease not only price, but also other lending conditions of SMEs even without banks making any move, the report noted, adding that the cheap finance will improve SMEs profitability and liquidity position, thus improving creditworthiness of the segment.
    Net 15% of banks polled by the MNB projected easier credit conditions for the next six months, the MNB said, noting that the outlines of the scheme were already known at the time of the poll. Credit conditions for SMEs were unchanged in Q1 2013 from the previous quarter after a long period of tightening.