Banking statistics for September 2024
Commentary by Miroslav Zámečník, Chief Advisor of the Czech Banking Association
The drawdown of new consumer loans in September reached a solid CZK 11.2 billion, slightly less than in the previous months, which were among the highest in the last four years. Some statements by CNB officials suggest that they find such increases in new consumer credit, shall we say, slightly worrying. It remains to be seen whether this is the case, as the situation on non-performing loans, which are used to finance consumption, has so far been quite stable on a year-on-year basis and the default rate is historically very low.
Although consumer credit alone, at 4.26%, has a three-tenths of a percentage point worse non-performing loan ratio than a year ago, we see a one percentage point drop in the non-performing ratio on credit cards to 3.52%, and there is a slight improvement on overdrafts and current account overdrafts. It is also good to say that, with real incomes rising, consumer "guts", including the willingness to take on debt, should rise, all else being equal.
At 8.9%, consumer credit interest rates are broadly stable and, with current consumer inflation, cannot be said to have any incentive to indiscriminate household borrowing with its rather high real interest rate.
It is still true that the population is repaying mortgages in an exemplary manner, and even in an international comparison, the share of non-performing mortgages of 0.6% is among the lowest in the EU. Mortgages recorded a fall in the volume of new business to just under CZK 20 billion, compared with CZK 25.65 billion in the previous month, with a slight fall in the average realised rate, as measured by the CBA's Hypomonitor, to 4.96%, compared with 5.05% in August.
Given the expectation of a stronger recovery in the Czech economy than the 1.3% preliminary reported by the CSO for Q3 (and 0.3% quarter-on-quarter growth), we are also trying to find numbers in the banking statistics that would suggest a higher appetite for investment by businesses.
If we look at the development of corporate loan balances with maturities of over five years, which are typically investment loans, we see a month-on-month increase of CZK 12 billion (+1.55%), and a solid 8% year-on-year increase, or CZK 58.5 billion. In terms of new loan disbursements by currency, CZK 27 billion of foreign currency loans were granted in September, and CZK 24.8 billion of koruna loans, despite the fact that the interest rate differential shrank to 0.7 percentage points in September, with koruna loans bearing interest at 5.9% and euro loans at 5.2%.
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, has thus thinned considerably, and it cannot be ruled out that it will eventually disappear over time, as it did in the past.
Despite the slight increase of four hundredths of a percentage point, we are still witnessing an incredible series of extremely low levels of the share of non-performing corporate loans, i.e. those that companies have difficulty repaying for more than 90 days. In August, the share was just 2.38%, rising to 2.42% in September, the second best figure ever.
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 recent years in the 2022 half-year and has risen almost every month since then, now hovering around 8% since January this year and 7.8% in September. So still relatively high, despite the trend in deposit rates, which have 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 less than CZK 8 billion, and by CZK 260 billion over the year to CZK 3,599 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. Over the past year, corporate deposits rose by almost CZK 89.5 billion to CZK 1 513 billion. They continue to exceed loans to businesses by CZK 129 billion.
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