Global Daily – Euro bank lending to companies jumps higher

by: Aline Schuiling

Euro Macro: Bank lending to corporate sector jumps higher – The ECB’s report about money and credit growth in the eurozone showed that bank lending to the corporate sector bounced back in July. The monthly flow in loans to companies (adjusted for sales and securitisation) came in at EUR 24bn, up from –EUR 9bn in June, underlining that the decline in June was merely a temporary blip. The jump in the flow in July lifted the annual growth rate from 2.0% to 2.4%. Loans to households picked up as well in July. The monthly flow increased to EUR 13bn, up from EUR 11bn in June, while its annual growth rate stabilised at 2.6%.

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Bank lending in the eurozone has been on a clear upward trend since the start of 2014 and we expect it to strengthen further in the coming quarters. This was also signalled earlier by the results of the ECB’s Bank Lending Survey for Q2, which showed that banks continued to ease credit standards on loans to companies and households, while demand for loans by both groups continued to increase. Indeed, we think that bank lending will continue to be fuelled by the ongoing economic recovery and the strengthening of fixed investment growth. Moreover, lending should be stimulated by the still low level of interest rates and the expectation that rates will probably rise in the coming quarters, as the ECB is gradually moving towards the end of its exceptionally accommodative policy stance. We think that the robust level of bank lending growth will strengthen the ECB in its view that it can start tapering its asset purchases as from the start of next year onwards. (Aline Schuiling)