KfW Credit Market Outlook: Upswing and low borrowing costs stimulate Germany’s corporate lending market

• New lending to corporates and self-employed persons was up 5.0% in 2017, making it an exceptionally good year
• Outlook for 2018 remains positive as business investment is growing
• The main risks lie in international trade conflicts

KfW Research estimates that new lending from banks to businesses and self-employed persons in Germany rose by 5.2% year-over-year in the final quarter of 2017 (moving growth rate across two quarters). Lending thus gained momentum once again at the end of the year after developing vigorously already in the preceding quarters. The overall result for the year 2017 is therefore also positive. On balance, German credit institutions expanded their corporate lending business by 5% last year.

2017 was therefore one of the most successful years for new lending to corporates and self-employed persons since the turn of the millennium. Only in 2007 and 2008 were the growth rates higher. But in light of the many years of structural weakness in the German credit market, the bar that had to be overcome was not very high. Benefiting from the excellent economic climate, the upward trend in corporate lending is likely to continue with stable growth rates in the first half of 2018. Lately, however, the political risks to the global economy have risen significantly again. An escalation of protectionist measures would not remain without consequences for the credit market either.

“From a business perspective there are currently good reasons for taking up loans”, said Dr Jörg Zeuner, Chief Economist of KfW Group. “Germany is in a prolonged upward business cycle, business confidence is outstanding and the high numbers of incoming orders in the final quarter demonstrate that the optimism is justified. At the same time, capacities are being increasingly stretched. Industrial capacity utilisation reached a multi-year high in the first quarter and is significantly above the historic mean value. I therefore anticipate that enterprises’ readiness to invest will grow further and with it their financing requirements.”

KfW Research calculates the KfW Credit Market Outlook exclusively for the German business newspaper Handelsblatt. The current edition is available at: www.kfw.de/Credit Market Outlook