Regulation / banks

Decline in number of residential construction permits issued in Germany – a healthy development

As the Federal Office of Statistics has announced, the number of residential construction permits in Germany has fallen by 6.6 percent in the first quarter of this year and now stands at 79,200 units. This is the first decline since the first quarter of 2012. Most affected are single-family dwellings. Here, the number of newly issued permits slumped by 15.3 percent. The still high level of construction permits and the bottlenecks in the construction industry continue to point to a slightly rising number of house completions for the time being and to demand for mortgage loans remaining high. Even if the recent fall consolidates into a new trend, there is no reason for panic. A collapse in house building is not to be expected, but rather a cushioned fall from current levels, which are meanwhile high.  

ECB’s monetary policy is heightening the pressure on banks

The monetary measures of the European Central Bank (ECB) are increasingly burdening the profits of banks in Germany and Europe. This is revealed in the ECB’s Bank Lending Survey for April on the lending business of banks. While the extended asset purchasing programme of the Eurosystem has directly or indirectly improved the liquidity position and financing conditions of banks in the last six months, the improvements in Germany resulted primarily from clients‘ cash asset reallocations into bank deposits and to a lesser extent from the sale of banks‘ own securities. However, a significant majority of the institutions surveyed in Europe also reported contracting net interest margins and a deterioration in the overall earnings situation of banks. The reduction in lending rates, boosted by the asset purchasing programme, has particularly contributed to this development. The average European effective interest rate on new business with corporate clients fell in February to a…

ECB monetary policy braced for a trend reversal

The sentiment indicators in the Eurozone are in a celebratory mood. Both the purchasing managers‘ indices as well as the business climate indicators are signalling an acceleration in economic pace in the Eurozone in the months ahead. The recovery is evidently not just restricted to certain countries, with quite a few EMU member states recently delivering robust economic signals. The upswing in the Eurozone thus appears to be gaining a broader base. This encouraging development might be attributed to a slight acceleration in global economic activity. A slightly higher oil price and a still very stable economic development in China are also contributing towards this trend. The spectre of deflation, that had kept market players and central bankers in suspense last year, has receded in response to a strong increase in European inflation rates. Inflation pressure remains low, but the latest positive developments regarding the economy and inflation are creating…

Non-performing loans: Tense situation in Europe made worse by Italy

As revealed in the latest figures of the European Banking Authority (EBA), the share of non-performing loans (NPLs) in the total liabilities of banks in the European Union declined in the fourth quarter 2016 by 0.3 percentage points to 5.1 percent. While a drop can be noted in virtually all countries, the overall situation is only improving very slowly and extreme differences continue to exist between the countries. For example, NPLs in the UK, the Netherlands, Germany, Denmark and Belgium cause few problems, with the NPL ratio at an extremely low level in these countries of between less than two and a good three percent. This contrasts with the banks in Greece and Cyprus which, with an NPL ratio of 46 and 45 percent respectively, are at risk suffocating beneath the burden of NPLs. Ailing banking sectors can also be found in Portugal, Ireland and in particular in the economic…

Lending growth in the Eurozone remains weak

Last year, banks‘ loans to companies, private households and governments grew in the Eurozone by 0.9 percent to EUR 10,774bn. Private loans for house purchases, which rose by 2.4 percent, accounted once again for the highest growth contribution. In the segment of loans to corporate clients, the long years of contracting loan volumes came to a halt, with corporate loans climbing in 2016 by 0.6 percent. In contrast, the volume of loans to regional and local authorities has further declined. All in all, the renewed growth in customer loans that was already evident in 2015 has stabilised, but there are still no visible signs of accelerating momentum on the European credit market.  Furthermore, great differences could be noted in developments between individual national markets: the Europe-wide growth was driven almost entirely by banks in France and Germany which recorded above-average gains in their respective loan volumes. In contrast, banks‘ lendings…

Growth in credit markets in Germany expected to accelerate

Last year, the surge in growth in Germany’s credit markets seen from the end of 2015 onwards stabilised and intensified. Corporate and private households’ bank debts rose 2.7 percent to EUR 2,372.3 billion. In other words, the usually sluggish trend of past years was at long last overcome. Private property financing was again the growth driver. With stronger new building activity and increasing demand, as well as rising prices in the property markets, the need for credit grew appreciably. Demand was also buttressed by extremely favourable financing terms. The only thing preventing even more buoyant growth was the translation of the EU Mortgage Credit Directive into German law, which led to stricter regulations for loan approvals above all for senior citizens and young families. The trend for corporate credit was also gratifying: From 2013 to 2015 this market segment saw only weak, indeed usually negative change rates. However, in 2016…

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