In the first quarter of 2024, banks kept the criteria for offering substantially stable Loans. However, after the recent restrictions due to the measures adopted by the ECB, there has been a new contraction in demand from businesses and a marked decrease in the request for mortgages by families. The latter seem to prefer to turn more to consumer credit.
This is the picture outlined by the survey conducted by Bank of Italy to contribute to the quarterly survey of the ECB and the Eurosystem. The general conditions for corporate financing have been tightened slightly, mainly through a increase in interest rates on loans; furthermore, margins were widened on loans granted to customers considered riskier.
Access to credit for loans and mortgages
The criteria for offering loans forhouse purchase on the part of families remained stable, according to Via Nazionale: the slight increase in risk was balanced by greater competition between banks. This element, they underline, has led to more favorable terms and conditions for mortgages. The supply policies for consumer credit were more restrictive overall. For the next quarter, banks expect a slight easing of criteria for loans to non-financial companies, while those intended for households are expected to remain stable.
Meanwhile, in the first quarter, the decline in credit demand by businesses, a trend that has lasted for five consecutive quarters according to the survey, and which seems to reflect a greater use of internal resources, a lower need for fixed investments and high interest rate levels.
The request for financing for the purchase of homes by families has decreased significantly, while that for financial purposes has increased best before date. In the current quarter, demand for loans from businesses and households for consumption purposes is expected to remain stable, while demand for home purchases will increase slightly. According to Bank of Italy, the conditions of access to financing for banks have improved mainly with regard to debt securities and, to a lesser extent, long-term deposits.
Conditions for Italian banks are improving
In the current quarter, financial intermediaries expect further improvements. In the six months to March, changes in the Eurosystem's monetary policy asset portfolio were slight negative impact on the total assets of the banks, on financing conditions and on the liquidity position; however, they did not have a significant impact on the bidding criteria, nor on the general terms and conditions, although they did slightly influence the volumes disbursed.
Also according to the Bank of Italy's investigation, the repayment of the third tranche of the ECB's ultra-subsidized loans (Tltro III) contributed to the deterioration of the banks' financing conditions, an effect that could continue over the next six months.
However, these operations did not affect the changes in offering criteria for loans, nor on the terms and conditions of financing and the volumes disbursed. The decisions regarding the ECB's reference interest rates had a positive impact on the overall profitability of intermediaries thanks to the increase in net interest income. However, the Bank of Italy warns that a negative impact is expected in the next six months.
