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Nov 29, 2017 17:21 EEST
ZAGREB (Croatia), November 29 (SeeNews) – Demand for credit increased in central, eastern and south-eastern Europe (CESEE) in the six months to September 2017 and supply conditions eased, the European Bank for Reconstruction and Development said on Wednesday.
In the reviewed period, international banks were distinguishing among CESEE countries on the basis of local operations’ returns, market potential and positioning, pushing up expectations of future selective strategic expansions, the EBRD said in a statement, citing the latest Bank Lending Survey by the Vienna Initiative.
The report covers the period between March and September 2017.
Although an increase in demand for credit is present, the Vienna Initiative found that a perceived gap between demand and supply still persists.
Demand for loans and credit lines continued to increase, marking the ninth consecutive positive semester, it said, with working capital accounting for a good part of the demand stemming from enterprises.
Supply conditions, however, eased over the past six months, and this is the first significant easing over the past two years.
Across the client spectrum, supply conditions eased on lending and consumer credit for small and medium-sized enterprises, while they tightened on mortgages, according to the report.
However, domestic regulatory environments, domestic banks’ capital constraints, and groups’ NPLs and global market outlook are still partially constraining supply conditions.
"Starting from high NPL levels, credit quality has continued to improve, and is expected to continue to do so over the next six months", it noted, adding that over the past six months, and for the sixth time, aggregate regional NPL ratios recorded an improvement in net balance terms.
The latest NPL Monitor report produced for the Vienna Initiative shows that non-performing loans in CESEE continued to decline in the 12 months to the end of 2016, benefiting from improvements in the regulatory environment for impaired credits and in the secondary market for bad debt.
The Initiative's report shows a decline in the regional NPL ratio to the end of 2016 to 6.2 per cent, down 1.5 percentage points from a year earlier.
The remaining stock of NPLs in the region had fallen a sharp 18.1 per cent to 46.5 billion euro ($55.1 billion), representing around 3.8 per cent of GDP, it said.
The report warned that NPL ratios in the region remain persistently high for many countries, exceeding 10 per cent in 6 of the 17 CESEE countries, including Serbia (17%), Croatia (13.6%) and Bulgaria (13.2%).
None of the countries, however, had a ratio above 20 per cent, while a number of regulatory changes are foreseen in the next 12 months which could further remedy the situation.
The momentum created by EU regulators in 2017 in tackling more effectively the NPL challenges in Europe is also expected to have positive spillover effects on adjacent CESEE countries, the Initiative noted, adding that this will increase the sense of urgency to align with best practices.
Details on the NLB ration in SEE countries at the end of 2016 follow:
Additionally, the Vienna Initiative noted that over the last 18 months, from January 2016 – June 2017, 6 billion euro in NPL transactions have been realised in the CESEE region, with Romania, Croatia and Hungary accounting for 70% of the total value.
The Vienna Initiative was founded at the height of the global financial crisis of 2008-09 as a public-private sector platform to support banking sectors in CESEE. It now works on specific financial sector problems in the region.
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