Newsquawk

ECB bank lending survey - Q1 2023; net 27% of EZ banks reported tightening of lending standards for companies, 38% reported fall in demand for credit from companies

Banks indicated that their credit standards for loans or credit lines to enterprises tightened further substantially in the first quarter of 2023

Banks also reported a further substantial net tightening of credit standards for housing loans in the first quarter of 2023, while the net tightening became less pronounced for consumer credit.

Firms’ net demand for loans fell strongly in the first quarter of 2023. The decline in net demand was stronger than expected by banks in the previous quarter and the strongest since the global financial crisis.

The net decrease in housing loan demand remained strong and close to the sharp net decrease in the fourth quarter of 2022, which was the highest since the start of the survey in 2003.

Banks’ overall terms and conditions (i.e. banks’ actual terms and conditions agreed in the loan contract) for new loans to firms and households tightened further.

Ongoing reduction in central bank balance sheet linked to TLTRO repayments and end of full APP reinvestments contributing to weakening lending dynamics.

Via ECB

Analysis details (09:13)

Overall, the bank lending survey indicates a marked tightening of financial conditions for the 22nd March - 6th April survey period.

While a tightening of conditions was expected, given we are in a tightening cycle, the magnitude of it is seemingly pronounced as evidenced by remarks such as "decline in net demand was stronger than expected by banks in the previous quarter and the strongest since the global financial crisis.". Overall, the release is "dovish" and adds to the base case that the May 4th meeting will result in a 25bp hike to 3.25% with the implied probability of such an increment increasing slightly to a near 80% chance (vs just shy of 75% pre-release).

02 May 2023 - 09:00- Important- Source: ECB