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Decomposition of retail loan growth

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  • Martin Cesnak

    (National Bank of Slovakia)

Abstract

Retail loan growth, especially housing loan growth, in Slovakia continues to be one of the highest within the euro area, even during and after the COVID-19 pandemic. We decompose the annual growth rate of retail housing and consumer loans into the main factors enabling this high growth. These factors include growth of collateral value related to the strong price acceleration of residential real estate, income growth, the long-term decline of market interest rates and the extension of loan maturity. The latter is mainly used for refinancing loans and represents the strongest factor enabling increase of principal. Using microdata of individual retail loans granted in Slovakia, we show that the growth of housing loans would have been at least a third lower without these factors. The recent decrease of the consumer loan stock is explained by the strongly declining demand for consumer loans, triggered after the outbreak of the pandemic.

Suggested Citation

  • Martin Cesnak, 2023. "Decomposition of retail loan growth," Working and Discussion Papers OP 1/2023, Research Department, National Bank of Slovakia.
    • Handle: RePEc:svk:wpaper:1092
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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