Euro area loan supply conditions likely improved in Q2; corporate demand expected to have dropped

The bank lending survey of the European Central Bank in April indicated rebounding loan supply conditions for enterprises; however, tightening for house purchases. It also showed rising loan demand throughout the board. The July’s publication is also likely to show almost the same result with an additional easing of conditions probable after further drop in interest rates, said Societe Generale in a research report. However, certain effect from the Brexit vote cannot be ignored.

The survey is carried out usually in the second half of the last month in the quarter. This suggests that the response would have been received from before as well as after the referendum result in June. The period of high uncertainty is expected to mostly impact demand for loans from enterprises, according to Societe Generale. Meanwhile demand for credit is expected to remain largely flat and buoyant with current strength in demand for housing credit as rates continue to be low.