Eurozone: Bank lending slowing down, conditions set to tighten – ABN AMRO

Aline Schuiling, senior economist at ABN AMRO, points out that the recent ECB data suggest that growth in loans to non-financial companies has slowed down in the course of last year and should lose further momentum in the coming months.

Key Quotes

“The annual growth rate in bank loans to companies (adjusted for sales and securitization) has declined from levels above 4% during the period June-September 2018 to 4.0% in December 2018. The three-month moving average monthly flow in these loans slowed down from levels close to EUR 17bn in the first half of 2018, to levels of around EUR12bn in December.”

“If the monthly flows would remain close to this level, the annual growth rate would fall to around 3% in the final months of this year. However, the flow will probably soften further. Indeed, although the most recent bank lending survey (BLS) shows that bank in the eurozone, on aggregate slightly eased bank lending standards in the final quarter of 2018, they expected to tighten them in the first quarter of 2019.”

“In addition, given that developments in the bank lending tend to lag economic activity, it is likely that these trends will deteriorate going forward. Overall, we think that the early data on bank lending and the outlook supports the view that the ECB will soon announce a new (T)LTRO.”