Banking statistics for June 2024: New loans to households are growing briskly this year
Economic commentary by Jakub Seidler, Chief Economist of the CBA
The Czech Banking Association publishes a series of economic indicators in the CBA Monitor, including the main parameters of the development of loans and deposits in the domestic banking system. Thus, at https://www.cbamonitor.cz/kategorie/uvery-a-vklady one can find monthly updates of banking statistics published by the Czech National Bank.
The volume of newly granted loans to households is growing this year
Newly granted consumer loans reached CZK 11 billion in June, the volume of which slowed down slightly compared to May, but in annual terms it is still a double-digit increase (see Chart 1). In the first half of the year, the volume of new consumer credit rose by almost a third. The favourable development in consumer credit is due to the improving income situation of households, higher consumer confidence and the need for more financing in view of the inflationary developments of recent years. The average interest rate on consumer loans in June was 9.1%, half a percentage point lower than a year ago. Overall, however, rates on consumer loans have seen a more modest increase over the past two years in the context of the rise in CNB base rates. While the average rate for consumer loans in 2021 was 7.7%, the 2023 average was 9.7%.
In the case of mortgage loans, the strong year-on-year increase also continues, but is also driven by the lower benchmark base from last year. As a result, year-on-year growth in mortgage lending reached 85% in the first half of the year. According to official CNB statistics, CZK 89 billion of new mortgages were actually granted in the first half of the year (Chart 2), which is the same volume as in the same period of 2018 and only CZK 7 billion below the level of the first half of 2020. The average rate for newly granted mortgages is slightly above the 5% mark, according to CNB statistics, which is in line with the CBA Hypomonitor data.
New loans to businesses are evenly distributed between those in koruna and euro
The volume of new lending was weaker by almost 20% year-on-year in June, but monthly statistics are very volatile for these types of loans, which on the contrary recorded a significant year-on-year growth in the previous month. In the first half of the year as a whole, the volume of new lending to businesses rose by 5.4% (Chart 3), of which 4% for koruna loans and 6.6% for euro loans. New lending to businesses was split equally between koruna and euro loans in the first half of this year. The interest rate on koruna loans was 6.7% and was more than 2 percentage points lower than a year ago, while the interest rate on euro loans was 5.2% and has been declining only slowly (5.6% a year ago), given the development of euro interest rates.
Deposit rates continue to fall slightly
In June, the annual growth rate of deposits slowed slightly from 7 to 6.5%, but households have maintained solid growth of over 8% this year. In the case of corporates, annual growth fell from 2.8% to 1.3% (Chart 5). Interest rates on deposits with agreed maturity continue to fall in the face of the CNB's reduction in base rates. For households, they reached 4.3% in June, while at the end of last year they were close to the 6% mark, while for corporates they are 4.6% and around 2 percentage points lower than a year ago.
The share of euro-denominated deposits remains relatively stable, although it is increasing slightly in the long run, especially for corporate deposits. Here, it stood at 21.7% in June, compared with an average of 19% in 2019. For households, the share is at 3% this year, compared with 2.1% in 2019.
Despite the advent of the pandemic and the continued bad economic times associated with energy crisis and rising household costs of living due to two years of double-digit inflation, the share of non-performing loans in the domestic economy continues to trend favorably and is near its all-time lows. In June itself, NPL ratios declined slightly further. This was driven both by the fall in the volume of non-performing loans themselves and by an increase in the total loan portfolio, i.e. a rise in the denominator of the non-performing loan ratio. Overall, the development of NPL ratios can thus be viewed positively, although a slight increase in the absolute amount of NPLs has been observed in some loan segments since the end of last year.
