In May 2024, compared to May 2023, banks and credit unions granted more of the three main types of credit products in numerical terms: installment loans (+58.6%), mortgage loans (+36.1%), and cash loans (+6.2%). However, they issued fewer credit cards (-0.1%). In value terms, banks and credit unions granted higher amounts for all credit products: mortgage loans (+54.1%), cash loans (+20.3%), installment loans (+15.2%), and credit card limits (+11.0%). From January to May this year, banks and credit unions issued more mortgage loans (+122.0%), installment loans (+87.4%), cash loans (+12.5%), and issued more credit cards (+0.9%) in numerical terms. In value terms, they granted higher amounts of mortgage loans (+165.2%), installment loans (+31.0%), cash loans (+25.0%), and credit card limits (+10.8%).
The upward trend in the sale of bank loans continues. In numerical terms, three main credit products recorded positive dynamics, and in value terms, all four products did. Installment loans still show positive sales dynamics (+15.2%), especially for amounts up to PLN 1,000. The numerical increase was even more spectacular, amounting to (+58.6%). This significant growth is mainly due to low-value installment loans resulting from the conversion of unpaid obligations from interest-free periods within deferred payment purchases (BNPL) into installment loans through the purchase of these receivables by banks.
The activity in cash loans was also positive for the banking sector. Their number increased in May this year (+6.2%), and the value of credit operations increased by +20.3% year-on-year.
The average value of an installment loan granted in May 2024 was PLN 2,033, which was 27.4% lower than in May last year. Meanwhile, the average value of a cash loan was PLN 24,656, up 13.3% from May last year.
In May 2024, there was noticeable stabilization in interest in credit cards. Compared to May of the previous year, the number of issued cards practically did not change (a very slight decrease of 0.1%), and the value of granted limits increased by 11.0%.
Mortgage loans deserve separate analysis. They continue to be more popular than a year ago, despite the absence of a new support program for borrowers. The previous program accounted for about 60% of credit operations in the second half of 2023. So what is behind the still strong credit activity despite concerns earlier this year? There are several main sources of this phenomenon.
– In May 2024, banks granted 15,000 mortgage loans worth PLN 6.21 billion. The continued high sales compared to May last year are influenced by higher creditworthiness. This is mainly due to a real increase in wages (about 10%) and the stabilization of interest rates at about 1.0 percentage point lower than last year. This directly translates into a higher value of the granted mortgage loan. In May this year, its average amount was PLN 414,400, which was 13.2% higher than a year ago,” says Dr. Waldemar Rogowski, Chief Analyst of the BIK Group.
– In May this year, compared to the historically record-breaking January this year, the value of granted mortgages decreased by about PLN 4.1 billion. Also, in May compared to April this year, both the number (by 1,600 loans) and the value (by PLN 657 million) of granted mortgage loans decreased. Since the beginning of the year, we have seen a month-on-month decline in credit activity. Its still positive year-on-year dynamics are mainly due to the low base from May last year and increased creditworthiness allowing for higher loan amounts. Currently, the market is waiting for the fate of the new support program. In its absence, a negative year-on-year credit activity dynamic can be expected in the second half of the year. Just as the low base from the first half of last year supports positive dynamics in the first half of this year, the high base (BK2% program) from the second half of last year, without the launch of a new government support program, will result in negative dynamics. The decline in credit activity may be partially compensated by mortgage loans taken out by people who, due to still rising property prices, will accelerate their decision to take out a loan. The decline in the value of credit operations will also be further weakened by the increasing value of granted loans.
Still Good Quality of Granted Loans
The monthly reading of the Quality Index for the mortgage loan portfolio in May 2024 was 1.06%. Over the last 12 months (from May 2023 to May 2024), the quality of the portfolio has improved, as evidenced by the Index’s decrease of (-0.26 p.p.).
– The current reading of the Quality Index for mortgage loans is better than a month ago (a decrease of -0.03 p.p.) and a year ago. The delinquency rate of złoty loans is at a low level, and loans granted in a higher interest rate environment are also being well repaid. In this situation, it is difficult to substantiate the need to extend the credit moratoriums from June 1. The cost of the moratoriums will be borne by banks (reduction in revenue), bank owners (including pension funds and investment funds), and all taxpayers (reduction in income tax revenues paid by banks). For people in a real situation related to possible difficulty in servicing a loan, the appropriate instrument of assistance is the Borrower Support Fund (FWK), especially since access to it has been liberalized,” explains Waldemar Rogowski.
The current May reading of the Quality Index for the installment loan portfolio was at 1.30% – only 0.24 percentage points higher than the Quality Index for mortgage loans.
However, cash loans are characterized by significantly higher delinquency (the highest among all product groups). The May reading of the Quality Index for cash loans was 4.09%.
– Compared to May 2023, the value of both the Quality Index for cash loans and installment loans has improved (decreased), by 1.01 percentage points and 0.35 percentage points, respectively. Further improvement in quality should be supported mainly by the real increase in wages with stable interest rates. Meanwhile, the value of the Quality Index for credit cards in May this year was 3.35%, which, apart from cash loans, is the highest Index value among all product groups. However, in annual terms, the Index value has decreased (improved) by (-0.75 p.p.),” notes the Chief Analyst of the BIK Group.
