Favorable lending conditions and improved demand for loans continued to underpin further recovery in bank credit in Eurozone during the three months to June, and both businesses and households are expected to take more loans in the third quarter, results of a survey by the European Central Bank showed Tuesday.
The quarterly Bank Lending Survey, which was conducted between June 9 and 24, showed that credit standards on loans to enterprises eased further, largely due to competition, albeit at a slower pace. However, they expect no further net easing of credit standards in the third quarter.
Net demand for loans to enterprises rose significantly with 13 percent banks reporting an increase, up from 1 percent in the previous quarter. Though this was below their expectations, banks expect a further surge in demand in the three months to September.
Credit standards for loans to households for house purchase eased in the second quarter after a tightening in the previous three months. It was also in contrast to banks’ expectations for further tightening.
Going forward, euro area banks expect a considerable net tightening of credit standards applied to housing loans in net terms in the third quarter.
Meanwhile, demand for housing loans rose strongly in the second quarter with 49 percent banks reporting an increase versus 30 percent in the previous survey. The increase was well above the historical average change in demand and again exceeded banks’ expectations from the previous survey round, the report said. For the third quarter, euro area banks expect further substantial increase in demand.
“All of the largest euro area countries reported an increase in net demand for housing loans, with the exception of Spain where no change was reported. Increases in net demand were highest in the Netherlands, where all banks reported an increase in demand, and in Italy,” the report said.
“Housing market prospects and the low level of interest rates were the main factors contributing to increased demand for housing loans in the euro area. Consumer confidence also continued to be an important factor.”
Credit standards for consumer credit and other lending were eased further in the second quarter and the easing was greater than expected. The easing is expected to continue at a steady pace in the third quarter.
Demand for consumer credit and other lending rose substantially in the second quarter, holding well above its historical average, with 41 percent banks reporting an increase versus 12 percent in the previous survey. In the third quarter, demand is expected to grow at a slower rate.
“To what extent investment plans and consumer sentiment are impacted by the Greek turmoil, remains to be seen,” ING Bank economist Teunis Brosens said.
“The Bank Lending Survey does show that at least before the Greek showdown, bank lending in the Eurozone was increasingly supporting the Eurozone recovery.”
The material has been provided by InstaForex Company – www.instaforex.com