Monday, August 22, 2011

22/08/2011: July Banks Survey - Euro area credit supply to enterprises

There are rumors circling euro area banks about the impeding liquidity crunch and rising risk profiles. In this light, it is illustrative to take a look at the latest Banks Lending Survey data from ECB to see if there are new trends emerging in terms of credit supply.

This post will look at some data from the Surveys covering lending to enterprises, while the follow up posts will deal with the core drivers of changes and with banks' lending to the households.

First, consider the aggregates (all data through July 2011) - with Chart below illustrating:
  • Overall in terms of lending to the euro area enterprises, 8% of banking survey respondents indicated that lending conditions have tightened or considerably tightened over 3 months through July 2011, while 5% indicated that their lending conditions eased or eased considerably.
  • The percentage of respondents who indicated tightening of conditions remained unchanged in July compared to June, but is up from 5% reported in May. Year on year, percentage of respondents reporting tighter lending conditions dropped by 4 percentage points, while percentage of those reporting easing of conditions rose 4 percentage points.
  • 87% of respondents indicated that their lending conditions were unchanged in 3 months through July 2011, down from 89%.
  • Over 3 months through July 2011, percentage of the banks reporting tighter lending conditions (8%) was below 9.25% 2010 average and significantly below 35% and 49.5% averages for 2009 and 2008.
  • The percentage of banks reporting easing of lending conditions in 3 months through July 2011 (5%) was above 2010 average of 3.75% and above 2008 and 2009 averages of 0.75% each.

For SMEs (Chart below illustrates):
  • Percentage of the banks reporting easing of considerable easing of lending conditions in 3 months through July 2011 was 3%, which is 3 percentage points above same period last year, but is unchanged from June and down from 4% in both April and May.
  • Percentage of the banks reporting tighter or considerably tighter lending conditions was 7% in 3 months through July 2011, up on 6% in May and June, but down from 15% in April. The percentage of banks reporting tighter lending to SMEs in 3 months through July 2011 was 7 percentage points lower than a years ago and at 7% compares favorably against 11.75% average for 2010 and 35.5% and 39% averages for 2009 and 2008 respectively.

For larger corporate loans (Chart below):
  • 9% of the banks reported tightening of lending conditions to large enterprises in 3 months through July 2011, which is 6 percentage points below the level of responses recorded in July 2010. However, the current percentage remains relatively close to 2010 average of 10.5%, although it is substantially down from 37.75% and 52.5% averages for 2009 and 2008.
  • Month-on-month, tighter conditions in July 2011 (9%) were less prevalent than in June (11%), but more prevalent than in May (7%).
  • Easing or considerable easing of lending to large enterprises was reported by 7% of the banks, up from 5% a month ago and 4 percentage points above the same level in July 2010.
  • Easing of conditions in 3 months through July 2011 (7%) is now ahead of the same figure for 2010 average (4.25%) and well ahead of both 2008 and 2009 averages of 0.5% and 0.75%.
On the net, data shows some stabilizing momentum in credit supply, but this momentum is extremely anemic. Overall, more lenders continue to tighten lending conditions for large enterprises and SMEs.
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