Thursday , April 26 2018
Home / Perspectives Pictet / Euro bank credit still strong in spite of February weakness

Euro bank credit still strong in spite of February weakness

Summary:
But today's credit report means ECB will have to tread carefully when it comes to reducing the degree of monetary accommodation.The euro area M3 and credit report for February was slightly disappointing overall. Broad money growth (M3) eased from 4.8% to 4.7% y-o-y.  Bank loans to non-financial corporations fell back to 2.0% y-o-y in February, from 2.3% in January, as a result of weaker lending flows across the region.Notwithstanding this modest setback, the euro area credit cycle remains broadly on track and further improvements in credit flows are likely in the next few months. Aggregate demand is rising, interest rates remain low, and ECB’s TLTROs should help at the margin. Finally, we note that euro area banks have continued to increase long-term loans with a maturity over 5 years, which bodes well for business investment spending this year.Against this backdrop, we continue to expect the ECB to tread carefully when it comes to reducing the degree of monetary accommodation.

Topics:
Frederik Ducrozet considers the following as important: , , , ,

This could be interesting, too:

Thomas Costerg writes Still no sign of a US ‘manufacturing renaissance’

Jean-Pierre Durante writes Where next for oil prices?

Laureline Chatelain writes Spreads for investment grade credits torn in different directions

Luc Luyet writes Russian rouble: significantly undervalued but quite risky

But today's credit report means ECB will have to tread carefully when it comes to reducing the degree of monetary accommodation.

The euro area M3 and credit report for February was slightly disappointing overall. Broad money growth (M3) eased from 4.8% to 4.7% y-o-y.  Bank loans to non-financial corporations fell back to 2.0% y-o-y in February, from 2.3% in January, as a result of weaker lending flows across the region.

Notwithstanding this modest setback, the euro area credit cycle remains broadly on track and further improvements in credit flows are likely in the next few months. Aggregate demand is rising, interest rates remain low, and ECB’s TLTROs should help at the margin. Finally, we note that euro area banks have continued to increase long-term loans with a maturity over 5 years, which bodes well for business investment spending this year.

Against this backdrop, we continue to expect the ECB to tread carefully when it comes to reducing the degree of monetary accommodation.

Euro bank credit still strong in spite of February weakness

Frederik Ducrozet
Mr. Frederik Ducrozet is a Senior Econoist at Banque Pictet & Cie SA, Research Division. Prior to this, he served as Senior Eurozone Economist at Credit Agricole Corporate and Investment Bank, Research Division from June 2006 till September 2015. He joined Crédit Agricole SA in 2005. Mr. Ducrozet contributed to the various publications of the research department, with a special focus on macroeconomic developments in Eurozone countries, including on the outlook for fiscal policy and the ECB’s monetary policy. Do not hesitate to contact Pictet for an investment proposal. Please contact Zurich Office, the Geneva Office or one of 26 other offices world-wide.

Leave a Reply

Your email address will not be published. Required fields are marked *