Industrial economy slows down growth of corporate loans in Germany

The economic problems in parts of German industry are increasingly reflected in the banks' lending business. As the results of the latest ECB Bank Lending Survey in Germany show, banks tightened their lending conditions for companies in the final quarter of 2019, for example by widening margins. Although the demand for credit from corporate customers continued to rise overall, this was not the case in the first quarter of 2019. However, growth was driven by small and medium-sized enterprises, while demand for loans from large companies actually declined.

For the coming months, a clear majority of banks expect demand for loans from corporate customers to shrink. Compared to the October survey, the share of pessimistic banks has even increased, especially with regard to large companies. Even if no further tightening or even loosening of lending guidelines is planned for the time being, the growth of corporate loans on banks' books is likely to weaken further at the beginning of 2020.

This will reinforce a trend that was already apparent at the end of last year. Mainly because there are still no signs of a turnaround in the industrial economy, we expect a further slowdown in growth in the corporate lending business of banks in Germany in the course of 2020.

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