ECB’s bank lending survey likely to show continued improvement in loan conditions in Q3

The European Central Bank’s bank lending survey is expected to show that loan conditions probably continued to improve in the third quarter. The lending survey in July had indicated a continued easing in credit standards for loans, both to households and corporates, whereas demand calmed a bit. A similar scenario of gradual rebound in loan conditions and still strong demand is expected to be seen in the October publication, noted Societe Generale in a research report.

The data for July and August given by the ECB implies that the flow of loans for housing, in particular, and corporates in France and in Germany continued to be high. The euro area economy is expected to be relatively healthy in the future.

The possibilities of economic growth in the third quarter coming more than 0.3 percent sequentially have improved following the previous week’s strong industrial production figures, according to Societe Generale. Resilient growth, along with increasing inflation, is expected to translate into increased lending growth in the future.

But, there are two main concerns regarding bank loan take-up. Firstly, there are worries regarding fragmentation with a disproportionate amount of new loans in the currency bloc from the two biggest nations, stated Societe Generale. This is in spite of the fact that discrepancies in lending rates between peripheral and core nations have narrowed considerably. Secondly, the ECB CSPP program that began on 8 June has set off a solid recovery in corporate bond issuance that drags on the bank loans’ flow to huge firms.