Eurozone economic weakness!
A
tightening impact
on
lending standards!
According
to Nick Kounis, Head Financial Markets Research, ABNAmro, ‘loan demand reflects
Eurozone economic weakness!’
By
focussing Euro Macro, Nick says, corporate demand for bank loans now stagnating
– The ECB’s Bank Lending Survey (BLS) for 2019Q1 was published. In contrast to
what banks had expected in 2018Q4, lending standards on loans to non-financial
companies did not tighten in 2019Q1, but remained unchanged.
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
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. On the other hand, alternative
means of finance (including internal financing) had a negative influence on
loan demand.
The
results of the BLS seem consistent with recent data for loan growth, which has
been gradually declining since the middle of last year. This reflects the fact
that bank lending in the Eurozone tends to follow changes in economic activity
with a delay of around one year, and that GDP growth has weakened significantly
since the start of 2018.
“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.
(Aline Schuiling).
Comments
Post a Comment