KfW Credit Market Outlook: New lending to businesses shows surprising momentum

Frankfurt am Main (ots) -

- New business loans up 3.1% in first quarter of 2017
- With the economy doing well and borrowing costs expected to
rise, growing investment confidence is finally boosting demand
as well
- KfW Research expects the credit market to gain further momentum
into summer

Estimates by KfW Research indicate that new lending from German
banks and savings banks to businesses and self-employed persons rose
by a surprising 3.1% in the first quarter of 2017 compared with the
same period last year, after growing by 2.6% already in the final
quarter of 2016. There is a good chance that the credit market will
carry the momentum over into the summer. The positive development is
being driven by a mix of several factors: a healthy business cycle,
expectations of rising borrowing costs, fading political risks in
Europe, and now, companies' growing investment confidence.

'The election results of the past months - whether it be in the
Netherlands, Austria or France - have shown the disintegrative forces
their place. These are positive signs for Europe and also for
Germany', said Dr Jörg Zeuner, Chief Economist of KfW Group. 'Even
those who are not so euphoric must at least admit that the political
risks have diminished noticeably. For businesses, the uncertainty has
decreased, removing the barrier that kept them from investing more.
That will benefit new lending business this quarter and next.'

There will likely be further movement in borrowing costs as well.
Yields on government bonds with longer-term maturities had risen last
autumn already as a result of changing expectations. Furthermore,
inflation in Germany and the euro area as a whole has since shown
first signs of normalisation. That has now prompted the ECB to
verbally set the stage for a gradual exit from its unconventional
monetary policy. The US Federal Reserve Board has already lifted its
benchmark interest rates several times. 'Overall, signs are pointing
to an interest rate reversal. Credit costs will rise in the near
term. This is putting pressure to act on businesses that are ready to
invest - which is definitely a welcome development for the credit
market', said Zeuner.

At the same time, much has changed for the better on the lenders'
side. Banks have been helped by several trends since the second half
of 2016. The first is the steeper yield curve and the second is the
continuing cyclical upswing. Third, investors have become
significantly more optimistic again for the sector, which is
reflected in the strong performance of bank shares since they dropped
to a temporary low shortly after the Brexit vote. Overall, that
should have greatly improved banks' lending options recently, which
probably benefits most groups of companies as well.

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

Pressekontakt:
KfW, Palmengartenstr. 5 - 9, 60325 Frankfurt
Kommunikation (KOM), Christine Volk,
Phone: +49 (0)69 7431 3867, Fax: +49 (0)69 7431 3266,
E-Mail: Christine.Volk@kfw.de, Internet: www.kfw.de

Original-Content von: KfW, übermittelt durch news aktuell