Loans and deposits continued to increase markedly at French and German banks in the year to March, respectively spurred by demand for fixed investment and greater uncertainty causing depositors to park money.
Total loans at French monetary financial institutions, or MFIs, rose by 9.3% year over year to €7.41 trillion, while those at German MFIs rose 5.95% to €6.41 trillion, according to European Central Bank data compiled by S&P Global Market Intelligence.
Loan demand in the two countries was driven by resilient demand for fixed investment financing and the need to maintain inventories and working capital, an ECB spokesman told S&P Global Market Intelligence. Favorable conditions on bank loans relative to other sources of corporate financing also boosted demand.
MFIs in Benelux, the region consisting of Belgium, the Netherlands and Luxembourg, also saw a significant rise in total loans on a yearly basis. This year-over-year jump is the highest among their European counterparts. Their loans rose by 11.6% to €3.28 trillion from the year-ago €2.94 trillion. In contrast, Italy saw the smallest increase, with loans growing only 2.4% to €2.61 trillion from €2.55 trillion the previous year.
Spanish MFIs had the lowest levels of loans among their European counterparts, with their total loans at €1.93 trillion, a 4.9% increase from the year-ago €1.84 trillion.
The U.K. stopped sending statistical data to the ECB at the end of 2021, following its exit from the European Union in January 2020.
In its latest euro area bank lending survey released in April, the ECB said the demand for housing loans and consumer credit rose during the first quarter, mainly driven by the general level of interest rates. However, wholesale funding access deteriorated during the period across the bloc, the survey pointed out, reflecting tighter financial market conditions for banks. Lenders were concerned about the impact of supply chain disruptions, high energy and other input prices, as well as corporate exposures to Russia, Ukraine and Belarus on firms’ credit risks.
French and German banks also saw a continued uptick in deposits in the year to March. French MFIs’ total deposits rose to €6.77 trillion in the period, while those of German MFIs increased to €5.95 trillion.
Banks have reported to the ECB that the regulator’s negative deposit facility rate — the interest banks receive for money deposited at the central bank overnight — affected their profitability negatively for the past six months, the survey said. While having a negative impact on deposit rates, the deposit facility rate, which has been negative since 2014, gave a positive impact on non-interest rate changes on deposits from firms and households.
Banks’ ratio rankings
Sweden’s Svenska Handelsbanken AB (publ), Finland-based Nordea Bank Abp and Danish lender Danske Bank A/S had the highest loan-to-deposit ratios among a sample of the 25 largest European banks.
British banks Barclays PLC, Standard Chartered PLC and HSBC Holdings PLC are at the bottom of the list, with their loan-to-deposit ratios lowering on a yearly basis to 68%, 64.8% and 61.7%, respectively.