Czech banking assets up 7.8% y/y in Feb 2014, loan growth eases to 4.7%

By bne IntelliNews April 1, 2014

The aggregate assets of Czech commercial banks grew by 7.8% on the year to CZK 5.25tn (EUR 191.3bn) as of end-February 2014, speeding up from a 7.5% rise 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, on the other hand, weakened for the third straight month in February reaching 4.7% compared to 5.9% in January reflecting a drop in lending to the government and a slower growth in corporate loans. The value of loans reached CZK 2.51tn as of end-February, down 0.5% on the month. Loans to residents made up 89% of the total and increased by 2.7% y/y in February following a 3% growth the month before.

Lending to households expanded at the fastest rate in 20 months quickening to 4.5% in February from 4.4% in January. 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 a five-month low of 1.6% in February from 2.7% in January and the value of these credits totalled CZK 864.3bn. Loans to the general government fell 6.3% on the year to CZK 61.8bn, softening from an 8.1% 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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