December 6, 2023

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Giving new loans is beyond the target

Giving new loans is beyond the target

Disbursements of new bank loans for 2024 are now well off target given the marked decline in the summer and early autumn numbers The performance of credit expansion is elusive which was originally set.

Veteran bankers appear almost certain that the trend in new disbursements in the summer months will not reverse by the end of the year, and they are moving to readjust targets for the whole of 2023, capping net credit growth at a lower level.

As written News 24/7, The European Central Bank’s policy of sharply raising interest rates over the past year has created a “tsunami” of early loan repayments by companies with large cash reserves. This development led to the inability of banks, despite a significant increase in new loans, to show an expansion in net credit until the end of August..

However, apart from the increase in interest rates, the increase in premiums is also due to a technical reason: in 2022, large companies embarked on a significant increase in borrowing with working capital in order to have strong defenses in a series of negative developments such as the war in Ukraine. And the energy crisis. Of course, this year, when conditions returned to normal, there was no need for high working capital reserves, especially after the interest rate boom drove up costs.

Summer picture

According to data from the Bank of Greece, last August, the net credit expansion for the private sector, companies and households was negative by -401 million euros. That is, the new loans granted were less than the installments of the old loans.

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More specifically, Net loan flows (New loans minus installments) in the eight months from January to August 2023 amounted to -1.794 billion euros, of which net flows to companies – 956 million euros, to households – 689 million euros and to self-employed workers, farmers, etc. – 148 million euros. It is noted that household credit expansion has remained negative for more than ten years.

the Low flying in granting new loans This has led to a decline in the rate of credit expansion. Last August, the rate of credit expansion for companies and households reached a meager +0.9%, compared to +6.3% in December 2023.

The last quarter

This picture anyway It does not cause much concern to bank management Who are thinking of waging a final “battle” in the last quarter of the year.

Initially, an attempt was made in the area of ​​housing credit to stimulate demand, the main weapon being the strategy of keeping interest rates low in both fixed and floating loan products, despite the bullish climate shaped by ECB policy.

As they point out Senior executives in banks “Any demand for new loans is up to 90% for fixed rate financing, which, despite increasing by about 100 points in the past year, is still more attractive than floating interest rates.

Businessmen believe that banks have established a strong lending policy for the last quarter of the year, especially for companies with maximum resources for the recovery fund.

The Fund’s loans are constantly increasing, with the four systemic banks already contracting nearly EUR 2.5 billion, which, together with bank lending of EUR 1 billion, brings the investments financed to a level of EUR 5.5 billion, as of February 2022 when the program started.

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Companies from the energy, tourism, logistics, industry, infrastructure, shipping and trade sectors are under the microscope of the banks to open the channel.

Acceleration is expected to occur in 2024

If these moves pay off, Bank executives are optimistic that the picture for new payments will improve significantly in 2024.

This assessment is accompanied by the imminent end of the interest rate hike cycle, the completion of the repayment wave and of course an increase in investment activity due to the investment grade recovery.