Eurozone firms’ credit hunger hits record as consumers scrimp: ECB

Demand for credit among eurozone firms hit 17-year highs in the coronavirus-stricken second quarter, a European Central Bank survey showed Tuesday, while demand for consumer credit plumbed all-time lows.

Companies’ hunger for cash in April-June “reflects the particularly strong emergency liquidity needs of firms” as lockdowns gripped much of the 19-nation single currency bloc, the ECB said based on a survey of 144 banks.

Loan demand and drawing on credit lines by firms in the second quarter reached their “highest net balance since the survey was launched in 2003”, the central bank added.

Lenders reported their credit standards — the yardsticks they use to approve loans — remained largely unchanged for companies, as many governments stepped in to guarantee firms’ borrowings.

But the same indicator for consumer loans and mortgages tightened still further after a turn of the screw in the first quarter.

On the demand side, households’ demand for mortgages “declined strongly”, while net demand for consumer credit and other lending fell to its lowest since 2003.

“Weaker consumer confidence, worsened housing market prospects and lower spending on durable goods” have all taken their toll, the ECB found.

Looking ahead, banks expect slower growth in demand for company loans in the third quarter, while consumers’ appetite for mortgages and especially consumer credit may pick up again.