The corona crisis continues to dominate the lending business of banks in the euro area. Whereas in the April survey of the ECB the banks were still expecting a strong increase in demand for corporate loans and a significant decline in private real estate loans in the coming months, the picture in the current survey has returned to normal: Now there is only a small majority who expect a continued rise in demand for corporate loans and the banks are now slightly optimistic about real estate loans.
In fact, as a result of the crisis, companies have recently been increasingly asking for aid loans to counter liquidity bottlenecks caused by lockdowns and production stops. Especially loans with medium terms were in demand. At the end of May, this segment recorded a remarkable growth of 15.5 per cent. On the other hand, the pessimism in housing construction loans did not prove to be true. Here, loan growth even accelerated slightly to 4.1 per cent by May.
However, the banks are increasingly concerned about the creditworthiness of customers. Whereas in April the banks were planning to relax their credit guidelines for companies thanks to government guarantees, a large majority are now planning to tighten them. The majority of banks had already announced tighter rules for private real estate financing in April. In the current survey, the number of banks that want to pursue stricter credit guidelines has even increased.
The crisis represents a major challenge for the banking industry. Initially, this applied to the organisational effort in connection with the aid loans. Added to this are the massive shifts in the demand for credit: while short- to medium-term loans to bridge the crisis are growing strongly, the demand for long-term investment loans by companies is suffering. One ray of hope are the private housing loans, which will remain an anchor of stability for the lending business for the time being – especially in Germany. However, risks are increasing with the crisis. Government guarantees for aid loans are an important instrument in this situation. Nevertheless, the corona crisis is likely to set European banks back in their successful reduction of „bad loans“, which have caused problems in some southern European countries in particular.