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26.06.2017 – 10:00


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

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


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