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Austria results of the euro area-wide bank lending survey of July 2024 (Bank Lending Survey)
Vienna (OTS) – Demand for corporate loans has been falling since the fourth quarter of 2022. The Austrian economy continues to lack growth impulses from corporate investment activity. In contrast, private housing loans have seen a moderate recovery in demand since the first quarter of 2024 – starting from a historic low after sharp declines in demand in the previous one and a half years. The moderate recovery is due to improvements in affordability as a result of rising real incomes and slightly falling financing costs. This is shown by the results of the quarterly survey of the Austrian National Bank (OeNB) on the lending business, in which leading banks are asked for their assessments. The current survey was conducted in June 2024.
Demand for corporate loans falls for the seventh consecutive quarter
Demand for loans from companies fell again in the second quarter of 2024. This extended the downward trend that has been in place since the fourth quarter of 2022. There is a persistent weakness in demand, particularly for long-term loans to finance investments. In addition to the decline in investment activity by companies, high financing costs in particular have slowed demand for loans.
The survey results show an increasingly tense risk situation since 2022. The banks’ risk assessment of the general economic situation and the creditworthiness of companies has gradually deteriorated and has had a correspondingly restrictive effect on the supply of credit. The banks comprehensively tightened their offering policies for corporate loans from the second quarter of 2022 to the first quarter of 2024. In the second quarter of 2024, they left their offering policies largely unchanged.
Despite these developments, the statistical data for May 2024 still show positive growth in corporate loans in Austria (+1.2%), which was above the growth for the euro area as a whole (+0.3%).
The subdued demand for credit from companies for investments and the restrictive lending policies of banks mean that growth impulses for the Austrian economy from corporate investment activity are still lacking. This is reflected in the current economic forecast of the OeNB, which expects a further decline in capital investment in 2024. Overall, the domestic economy will stagnate in 2024 or grow weakly at best.
Moderate trend reversal in residential construction financing for private households
Demand for private housing loans remained largely constant in the second quarter of 2024, after rising slightly in the first quarter of 2024. The banks participating in the survey expect demand to rise again in the third quarter. A historic low in demand for housing loans is therefore likely to have been passed at the beginning of 2024. In the wake of the interest rate turnaround initiated by the ECB in July 2022, there was a significant drop in demand for housing loans from mid-2022 – starting from a record high. Further declines followed until the fourth quarter of 2023. Figures from the OeNB monetary statistics confirm the picture. Monthly new lending for private housing fell from an average of EUR 2.1 billion in 2021 to EUR 0.7 billion in January 2024, but rose slightly again to just under EUR 1 billion by May 2024. The survey results serve as a leading indicator and signal a further increase in new lending in the coming months.
The background to the emerging recovery is improvements in the affordability of loans. Real household incomes are rising significantly and financing costs are falling moderately. The ECB has cautiously adjusted its key interest rates downwards by 0.25 percentage points as of June 12, 2024. However, an expansive credit development like in the years of low interest rates until mid-2022 is not to be expected in the foreseeable future.
On the supply side, there have been few changes in the private housing loan business in recent quarters. The banks surveyed have only made minor changes to their lending policies and terms. Worth mentioning are the slightly reduced loan interest rates and margins in the second quarter of 2024, which were also justified by the competitive situation.
Impacts of climate change affect corporate lending
According to the survey results, banks are increasingly differentiating their lending policies according to the climate sustainability of individual companies. This leads primarily to tighter lending (stricter credit guidelines, less favorable credit conditions) for companies that contribute significantly to climate change, but also to a relaxation of conditions for “green” companies. Climate change and its consequences are already affecting the economic situation and creditworthiness of companies, and they cause physical risks that can affect the value of corporate assets.
On the demand side, companies’ need for financing for investments and restructuring related to climate change is increasing. This applies both to the transition to “greener” service provision and to hedging against physical risks of climate change.
The central banks of the eurozone – in Austria the Oesterreichische Nationalbank (OeNB) – together with the European Central Bank (ECB) have been conducting a survey on credit business in the eurozone four times a year since the beginning of 2003 in order to improve their information on banks’ lending behavior, demand for credit from companies and private households, and other topics relating to monetary policy. Around 160 leading banks from all eurozone countries are surveyed, including eight institutions from Austria.
A detailed report on the Austrian results will be published in the “OeNB Reports” series. Further information and data on the survey can be found on the OeNB website at:
The results for the euro area are published by the ECB on its website:
Inquiries & Contact:
National Bank of Austria
Mag. Maria-Elisabeth Faulmann
Press Officer
(+43-1) 404 20-6900
[email protected]
www.oenb.at