Czech banking assets up 7.5% y/y in Jan 2014, loan growth eases to 5.9% y/y

By bne IntelliNews February 28, 2014

The aggregate assets of Czech commercial banks grew by 7.5% on the year to CZK 5.25tn (EUR 192bn) as of end-January 2014, easing from an 8.8% y/y growth in the previous month, central bank data showed. The assets accounted for 146% of the full-year GDP forecast, according to IntelliNews calculations.

The annual lending growth weakened for the second straight month in January reaching 5.9% compared to 6.5% in December reflecting a drop in lending to the government and a slower growth in corporate loans. The value of loans reached CZK 2.53tn as of end-January, up 0.4% on the month. Loans to residents made up 88% of the total and increased by 3% y/y in January following a 3.7% growth  the month before.

Lending to households expanded at the fastest rate in 20 months quickening to 4.4% in January from 4.3% in December. The value of household loans totalled CZK 1.18tn, remaining flat on the month. The annual growth in corporate loans, on the other hand, weakened to 2.6% in January from December’s 3.8% and the value of these credits totalled CZK 871.9bn. Loans to the general government fell 8.1% on the year to CZK 57.2bn, deepening from a 6.4% decline in the previous month.

IntelliNews comment: We expect Czech loan growth to slightly accelerate in 2014 supported by the recovering economy which should return to a growth after two years of decline. Improving consumer confidence and rising real wages should support a growth in retail lending and the more favourable economic outlook and the new government’s plans for increased public spending should boost investments and corporate borrowing. According to estimates of the Czech Banking Association (CBA), bank lending growth is forecast to strengthen to 4.2% in 2014 from 3.5% estimated for 2013. The growth should further speed up to 5.4% in 2015.

In a new forecast published in February, consultancy Ernst & Youngthe said country will benefit the most in CEE from the euro zone recovery thanks to its strong banking sector with the low share of non-performing loans and the loan-to-deposit ratio below 100% suggesting that the Czech Republic has a significant potential for expanding credit without requiring support from parent banks.

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