The total value of outstanding bank loans in Slovakia edged up by 0.03% y/y to EUR 41.84bn as of end-July 2013, following a 2.2% annual growth in June, data by the central bank showed. In April, the overall lending portfolio of Slovak banks declined y/y for the first time since November 2010, a trend that was sustained also in May.

Commercial banks' corporate loan book narrowed by 3.4% y/y as of end-July, deepening from a 1.2% y/y decline in the previous month. The yearly growth in lending to households accelerated slightly to 9.6% from 9.5% in June.

On a monthly basis, the total value of outstanding bank loans fell 0.4% in July, following a 0.6% growth in June.

In July alone, the Slovak banks extended a total of EUR 1.44bn in new loans, lower than EUR 1.84bn in June and EUR 1.58bn in July 2012.

IntelliNews comment: The lending activity in Slovakia's banking sector has weakened since the second half of last year given the weak consumer sentiment, deteriorating domestic economic outlook and mounting risks in the external environment. The outstanding amount of corporate loans has been falling mainly due to the tightening of credit standards, but also due to the growing reluctance of companies to invest given the uncertain economic outlook.

We expect the lending market to be sluggish this year as corporate credit growth is set to hold back in line with the continuous fall in private investments. Retail lending looks resilient despite the economic slowdown and the weak consumer sentiment. It may be negatively affected by the high unemployment, but is supported by a slight improvement in consumer sentiment and increasing real wages, as well as by relatively low real estate prices and the low interest rate environment. New, stricter bank regulations and increased risks from default in line with the economic slowdown are also exerting pressure on the lending market.