Banking statistics for August 2024
Commentary by Miroslav Zámečník, Chief Advisor of the Czech Banking Association
The disbursement of new consumer loans reached a solid CZK 11.4 billion in August, which, by the way, is the same value as in July and the third best in the last four years. At the same time, the average rate fell from 9.3% to 9%, and a look at the chart suggests that the oscillations in average rates are much lower for consumer loans than for other types of loans. Mortgages saw an increase in new business from July's 23.75 billion to 25.65 billion, with the realized average rate as measured by the CBA's Hypomonitor at 5.05%.
The higher rates for consumer finance are explained by the fact that these are typically unsecured loans, as opposed to mortgages, which have collateral in the form of a pledge of the property being acquired, and still at the appropriate LTV ratio (currently the upper limit of 80% recommended by the Czech National Bank, increased to 90% for applicants up to 36% in the case of homeownership).
We cannot confirm July's recovery in demand for loans in the corporate sector, where the volume of loans exceeded last August's by CZK 77 billion (+ 5.8%) on a year-on-year basis, but their balance fell by CZK 5 billion month-on-month - so businesses were deleveraging in August, not the other way around.
In terms of currency, the composition was almost balanced in August, with CZK 25.8 billion of new koruna loans granted to companies, while euro-denominated loans amounted to CZK 23 billion, with interest rates gradually converging, with koruna rates on new business falling to 6.1% and euro rates on new loans to 4.9%.
The once massive interest rate differential, caused by the CNB's considerable lead in raising base rates compared to the ECB, and the market rates and mark-ups derived from them on PRIBOR and EURIBOR respectively, is thinning over time, and it cannot be ruled out that it will eventually disappear, as it did in the past.
Notwithstanding the gloomy readings of the indices measuring business and consumer sentiment, we continue to see an incredible series of extremely low levels of non-performing corporate loans, i.e. those that businesses have difficulty repaying for more than 90 days.
July's record low of 2.44% has been beaten, with the share reaching just 2.38% in August. The series of declines in their total volume to 33.6 billion crowns has also continued, up from four billion a year ago.
Residential mortgages are at an all-time low for a number of months with 0.6% non-performing, while consumer loans have deteriorated slightly with the share of non-performing ones falling from 4.21% in July to 4.24% in August. By the way: the share of non-performing loans in the Czech banking sector ranks seventh lowest in the European Economic Area. In Poland, the percentage of non-performing loans was almost four times higher.
Development of the main segments of the credit market (year-on-year, %)
Source: CNB, CBA Monitor
The year-on-year growth rate of household deposits has bottomed out in the first half of 2022, risen almost every month since then, and has now been around 8% since January this year, and 7.9% in August, still relatively high, despite deposit interest rates having fallen noticeably over the past year. Although at varying rates, the population's crown deposits have been rising steadily - the last month-on-month decline in the volume of the population's deposits was recorded in March 2022, and we know the explanation - it was the collapse of Sberbank in connection with the Ukrainian war. Last month their volume rose by CZK 14.8 billion, and by CZK 273 billion over the year to CZK 3,592 billion.
The year-on-year dynamics of deposits of non-financial corporations shows much higher volatility, characterised by ups and downs of the curve, often very sharp. We are currently seeing the pace fall from December's 7.5% year-on-year to June's 1.3%, only to rise to 5.3% in August. Over the past year, corporate deposits (including foreign currency) have risen by almost C$78 billion to C$1,542 billion in July.
Development of deposits in the main segments (year-on-year, %)
Source: CNB, CBA Monitor
Non-performing loans in main segments (%)
Source: CNB, CBA Monitor
Share of non-performing loans in EU/EEA countries (%)
Source: EBA