Lending dynamics in the euro area continued to strengthen in April. This is shown by figures published today by the ECB in connection with monetary developments. According to these figures, the annual growth rate of total lending to euro area residents rose to 4.9 percent. The sharp increase is mainly due to the consequences of the Corona crisis and the support measures taken and is being felt differently by borrowers: While the growth in bank debt of private households slowed down, it accelerated for companies from 5.5 percent in March to an impressive 6.6 percent in April. The dynamics of public sector lending were even stronger.
The crisis represents a major challenge for the banking industry. This applies not only to the organisational effort in connection with the aid loans. There are also the massive shifts in demand for credit: while short- to medium-term loans to bridge the crisis are growing, demand for investment loans from companies and for private housing loans, which have been an anchor of stability in the lending business up to now, is likely to shrink. At least that is what the latest Bank Lending Survey signals.
With the crisis, the risks are also rising. Government guarantees for aid loans are an important instrument in this situation. In addition to rising provision expenses, the persistently low interest rates are weighing on the banks‘ earnings situation. However, the central banks‘ securities purchase programmes, which are designed to combat the economic consequences of the Corona crisis, do not lead us to expect a significant rise in interest rates for a long time to come.