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Press Release from 2018-12-12 / Group, KfW Research

KfW Credit Market Outlook: Lending to corporates remains very strong for the time being

  • New lending to businesses and self-employed persons was up 9.6% in the third quarter
  • Steady investment momentum and higher accumulation of stock play a key role
  • Looking ahead, KfW Research expects growth to slow but continue on a high level

KfW Research estimates that new lending from banks to businesses and self-employed persons in Germany (excluding residential construction and finance institutions) grew again by an unusually strong 9.6% year-on-year in the third quarter of 2018. Lending to businesses thus increased for the ninth consecutive quarter. Looking ahead, KfW Research expects growth rates to slow down slightly but remain on a high level as the business cycle stabilises on a lower level than at the start of the year.

In the second quarter it was precisely the slower economic growth that played a key role in the higher momentum of new lending. The cyclical slowdown apparently caught many enterprises by surprise, requiring them to build up stockpiles which are typically refinanced with shorter-term loans. During the spring as well, particularly high growth was in fact observable in new short- and medium-term loans as well. In the third quarter there was no further increase in the growth rates of loans with shorter maturities. In the summer the motivation for lending appears to have shifted again from accumulating stockpiles towards financing investment, as shown by the most recent Bank Lending Survey.

“Germany’s very strong business cycle, which peaked in 2017, will moderate slightly on the level of potential growth this year and next”, said Dr Jörg Zeuner, Chief Economist of KfW. “That means two things for new lending from banks to businesses. First, the need for rather short-term loans to finance stockpiles will decrease further and second, the growth of loans for investment purposes, meaning longer-term loans, will drop slightly. The combination of both will probably lead to a significant decline in the dynamic of new lending, which will still remain above average if we take the last ten years as a frame of reference.”

KfW Research calculates the KfW Credit Market Outlook exclusively for the German business newspaper Handelsblatt. The current edition is available at:
www.kfw.de/KfW-Group/Service/Download-Center/Research-(EN)/KfW-Credit-Market-Outlook-(EN)/