Loans and deposits continued to increase markedly at French and German banks in the year to March, boosted respectively by demand for fixed investments and greater uncertainty which is pushing depositors to tie up their money.
Total loans to French monetary financial institutions, or MFIs, rose 9.3% year-on-year to €7.41 trillion, while those of German MFIs rose 5.95% to reach 6,410 billion euros, according to European Central Bank data compiled by S&P Global Market Intelligence.
Loan demand in both countries has been driven by resilient demand for fixed investment financing and the need to maintain inventory and working capital, an ECB spokesperson told S&P Global Market Intelligence. Favorable terms for bank loans relative to other sources of corporate finance also boosted demand.
MFIs in Benelux, the region comprising Belgium, the Netherlands and Luxembourg, also saw a significant increase in total loans on an annual basis. This year-on-year jump is the highest among their European counterparts. Their loans increased by 11.6% to 3.28 trillion euros against 2.94 trillion euros a year ago. On the other hand, Italy recorded the smallest increase, with loans increasing by only 2.4% to 2,610 billion euros against 2,550 billion euros the previous year.
Spanish MFIs had the lowest lending levels among their European counterparts, with total lending of €1.93 trillion, an increase of 4.9% from €1.84 trillion a year ago. year.
The United Kingdom stopped sending statistical data to the ECB at the end of 2021, following its exit from the European Union in January 2020.
In its latest survey of bank lending in the euro zone published in April, the ECB indicated that demand for loans for housing and consumer credit increased in the first quarter, mainly due to the general level of interest rates. . However, access to wholesale funding deteriorated over the period across the bloc, the survey found, reflecting tighter financial market conditions for banks. Lenders were concerned about the impact of supply chain disruptions, high energy and other input prices, and corporate exposures to Russia, Ukraine and Belarus on corporate credit risk.
French and German banks also saw a continued rise in deposits in the year to March. Total deposits of French MFIs reached 6,770 billion euros over the period, while those of German MFIs increased to 5,950 billion euros.
Banks have reported to the ECB that the regulator’s negative deposit facility rate – the interest banks receive for money deposited at the central bank overnight – has negatively affected their profitability over the past six months, according to the survey. While having a negative impact on deposit rates, the deposit facility rate, which has been negative since 2014, has had a positive impact on changes in non-interest rates on corporate and household deposits.
Ranking of bank ratios
Sweden’s Svenska Handelsbanken AB (publ), Finland’s Nordea Bank Abp and Danish lender Danske Bank A/S had the highest loan-to-deposit ratios among a sample of the 25 largest European banks.
British banks Barclays PLC, Standard Chartered PLC and HSBC Holdings PLC are at the bottom of the list, with their loan-to-deposit ratios decreasing on an annual basis to 68%, 64.8% and 61.7%, respectively.