September sa M3: +3.1% y/y
M3 sa 3-mo avg: +2.6% y/y
SA private loans: +2.5% y/y

MNI survey median:
September sa M3: +2.9% y/y
M3 sa 3-mo avg: +2.6% y/y
SA private loans: +2.6% y/y

MNI survey range:
September sa M3: +2.4% to +3.0% y/y
M3 sa 3-mo avg: +2.3% to +2.7% y/y

August sa M3: +2.7% y/y
M3 sa 3-mo avg: +2.3% y/y
SA private loans: +2.5% y/y

—

FRANKFURT (MNI) – Loans to the private sector maintained a steady
growth rate of 2.5% on the year in September, while broad money supply
(M3) surprised to the upside, jumping 3.1% over the same period, its
strongest growth rate since mid-2009, the European Central Bank reported
on Thursday.

Private sector loan growth was stable at +2.7% y/y after adjusting
for loan sales and securitisation, but overall credit extended to the
private sector slowed 0.2 percentage point to +1.6% on the year.

Household loan growth also held firm, rising 2.9% y/y, as was the
case in August, with mortgage lending – a crucial component of household
borrowing – was also steady, up 3.9% y/y.

Loans to non-financial corporations picked up slightly to +1.6%
from August’s 1.5% annual rise. Adjusting for loan sales and
securitisation, the growth rate also increased by 0.1 percentage point,
coming to +2.2% on the year.

Results of the ECB’s most recent Bank Lending Survey (BLS) showed a
“considerable” net tightening of credit standards in 3Q compared to the
previous quarter, reflecting the slowdown in economic growth and
weakening business confidence.

“In addition, reflecting renewed strains on banks’ access to
funding, banks’ cost of funds and balance sheet constraints contributed
more strongly to the net tightening of credit standards than in the
second quarter,” the ECB said in its monthly bulletin.

Banks continue to park a substantial volume of funds at the ECB
instead of lending out to each other, suggesting that credit supply
could remain tight. Proposals to ensure that banks are well capitalized
are also likely to weigh on loan growth in the near term.

However, the BLS also noted that demand for loans declined in the
third quarter, notably for housing loans, and they are likely to fall
“on a similar scale” in 4Q.

While the jump in the M3 boosted the three-month moving average to
+2.6% y/y, money supply remains well below the ECB’s target for price
stability of +4.5%.

Among the main components of M3, narrow money (M1) supply
accelerated to +2.0% y/y after +1.7% in August. While the pick up in
September was enough to boost the three-month moving average for M1, it
remains relatively subdued, signalling a less-than-optimistic outlook
for economic growth.

Speaking on Wednesday, ECB Governing Council member Mario Draghi,
the bank’s next president, noted that Eurozone economic activity was
“very moderate” due to slowing global demand and declining confidence.
He warned of “significant” risks to the Eurozone’s economic growth
prospects “in the context of strong uncertainty.”

–Frankfurt newsroom +49 69 720 142; e-mail:frankfurt@marketnews.com

[TOPICS: M$$EC$,M$X$$$,M$XDS$,MT$$$$,MTABLE]