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According to third-quarter ECB data, eurozone bank lending to businesses has increased by €392 billion (+8.2%) in the past 12 months.
Such clear growth in outstanding bank loans has not been seen since before the 2008 financial crisis. The only other significant recent increase in bank lending was in March–April 2020 during the Covid-19 lockdown. Between 2009 and 2019, and again between May 2020 and August 2021, the volume of outstanding bank loans stagnated and even declined.
The recent increase in outstanding bank loans is mainly driven by changing bond market yields and spreads. In the decade leading up to 2022, companies were able to access cheap funding in the bond markets, with the most creditworthy entities borrowing at rates close to 0%. This year, rising rates are often making credit markets costlier than bank loans, resulting in a wave of banking reintermediation following years of disintermediation.
This situation bodes well for the banking sector. Net banking income (NBI) should benefit from higher corporate credit volumes combined with rising rates since the start of the year at equal creditworthiness.
The opinion expressed above is dated November 11th, 2022 and is subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/eurozone-companies-become-cautious-about-borrowing/
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