Euro area banks expect net demand for loans to firms and households to increase further in the third quarter as both consumer and business confidence improve as the economic activity gains steam. In the second quarter, banks reported a moderate increase in firm’s demand for loans or drawing of credit lines, results of the latest quarterly bank lending survey of the European Central Bank showed Tuesday. Firms’ financing needs for fixed investment contributed positively to loan demand for the first time since the third quarter of 2019, suggesting that firms may become less reluctant to invest.
However, their financing needs for working capital remained unchanged owing to firms’ available liquidity buffers and the likely recovery in revenues given the improving economic situation, the survey said. Demand for housing loans increased strongly in the second quarter, underpinned by higher consumer confidence, favorable housing market prospects and the low general level of interest rates.
Consumer credit and other lending to households also increased in net terms, largely driven by higher consumer confidence and spending on durables.
Banks also expect credit standards to tighten slightly for loans to firms and to remain broadly unchanged for households in the third quarter.