Bank Lending Survey: German banks fear falling demand for corporate loans

ank Lending Survey: German banks fear falling demand for corporate loans

The economic slowdown in Germany is noticeably reflected in the results of the ECB’s current bank survey. For the first time in five years, the majority of German banks expect corporate customers‘ demand for credit to decline in the coming months. Large companies in particular are expected to have a lower demand for credit. At the same time, a slight majority of banks are planning to tighten their lending guidelines for corporate customers. The credit providers are thus reacting to the current slowdown in economic growth, which is particularly affecting export-driven companies in the manufacturing sector.

As the October survey continues to show, private housing loans, on the other hand, should contribute to stabilizing the credit market. The majority of banks believe that demand for credit will continue to grow, and institutions intend to relax their credit guidelines rather than tighten them. However, growth in real estate credit demand is likely to slow gradually. At least this is indicated by housing permits, which shrank by 2.5 percent in Germany between January and August compared with the same period last year.

All in all, the results of the current bank survey confirm our assessment that the credit market in Germany is gradually reaching its zenith and that growth is expected to be significantly weaker towards the end of the year and especially next year.

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