Portrait of an Ascending Sovereign Credit slide image

Portrait of an Ascending Sovereign Credit

Lending remains subdued The recovery in growth of loan portfolio is to be delayed due to Covid-19 outbreak and decline in the economic activity Key Highlights Loans to Domestic Clients (yoy) • Loans to domestic households and NFCs stood at 34% of GDP in June 2020, down from almost 100% at the outset of the global financial crisis 8% 6% . Lending had been subdued before Covid-19 outbreak and is expected to remain in negative territory 4% • • The impact of Covid-19 on the economy has not been reflected in the overall quality of bank loan portfolio yet; the coverage ratio of 90 days overdue loans remained high. Government support measures and the private loan moratorium are limiting growth in credit risk in the short term To facilitate continuation of prudent consumer and mortgage lending practice by banks in the longer term, the overall LTV restrictions of 90% (95% for participants of guarantee program) are supplemented with a DTI X6, DSTI 40%, maturity cap for mortgage 30Y and for other loans 7Y, LTV 70% for buy-to-let mortgages (effective from July 2020) Total Loan Portfolio Quality -6% -8% Source: ECB why 2% 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 -2% -4% NFCs HHs *The time series have been adjusted excluding the one-off effects of loan write-offs, exchange rate fluctuations, reclassification, etc. Domestic Loan-to-Deposit Ratio (%) 20% 15% 10% 5% 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Share of loan loss provisions in outstanding loans Share of loans over 90 days past due in outstanding loans Source: FCMC, Credit Register 16 161.5 184.9 141.1 99.9 82.4 73.2 2011 Q2 ■ 2020 Q2 113.8 91.8 Estonia Latvia Lithuania Euro Area Source: ECB
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