Eurozone: Corporate bank loans demand stagnating – ABN AMRO

Aline Schuiling, analyst at ABN AMRO, points out that according to the ECB’s Bank Lending Survey (BLS) for 2019Q1, lending standards on loans to non-financial companies did not tighten, but remained unchanged.

Key Quotes

“On balance, banks reported that cost of funds and balance sheet constraints (driven by costs related to banks’ capital position) had a tightening impact on lending standards. Also banks’ risk perceptions had had a tightening impact, for the first time since the start of 2017. However, these tightening factors were offset by an easing impact of increased competition.”

“The forward looking part of the BLS showed that banks expected to ease lending standards slightly on balance in 2019Q2. On the other side of the equation, banks reported that demand for loans by NFCs remained unchanged, on balance, in 2019Q1, after it had been rising non-stop since the middle of 2015.”

“On balance, demand for loans was influenced positively by the low level of interest rates, fixed investment, M&A activity, as well as by inventories and working capital, although the positive impact of all these factors was more moderate than in the second half of last year.”

“Looking forward, we expect economic growth to remain on its sub-trend growth level in 2019H1, implying that bank lending should slow further in the coming quarters.”