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Press Release from 2018-01-16 / Group, KfW Research

Momentum on Germany’s corporate lending market remains strong

  • New lending to enterprises and self-employed persons grew by 3.9% year-on-year in the third quarter of 2017.
  • Growth of new lending dipped slightly but remains robust
  • Outlook remains good

KfW’s estimates for Germany indicate that new lending from banks to businesses and self-employed persons (excluding residential construction and finance institutions) increased by 3.9% year-over-year in the third quarter. The growth rate has thus decreased slightly on the previous quarter (4.8%) but remains clearly above average compared with the period after the financial crisis. KfW Research expects new lending in the final quarter of 2017 to have grown at a similar or slightly faster pace than recently but also anticipates that growth will dip slightly at the beginning of 2018 after the strong development of 2017.

Several factors indicate that the trend will remain positive. On the credit supply side, conditions remain very good. Despite the cautious interest turnaround on the capital market since autumn 2016, enterprises’ borrowing costs remain on record low levels. At the same time, the Bank Lending Survey signals that credit institutions are tending to respond to tight competition by further loosening their criteria.

On the demand side, a number of factors point to continuing high new lending momentum. Business confidence is strong as the Ifo business climate breaks all previous records. The unemployment rate of 5.6% has dropped to a level not seen since Germany’s unification and the capacity utilisation rate is above the long-term average. A constellation of this type generates incentives to invest and so indirectly bolsters the high momentum of lending business.

Dr Jörg Zeuner, Chief Economist of KfW Group, said: "With third-quarter figures once again on pleasing levels, we are increasingly confident that the corporate lending market has now durably stabilised after years of weakness. Even if this assessment remains fraught with some uncertainty, we can nevertheless say with a relatively high degree of confidence that, at least in the near future, new corporate lending will remain vigorous.”

KfW Credit Market Outlook