Credit dynamics are declining
“The improvement of household and business balance sheets should prevent the dramatic increase in non-performing loans that occurred with the crisis of European sovereign debt, even in the face of the possible worsening of economic prospects “. This is what it refers to Affaritaliani.it Stefano Battista, Italy Financial Services Market Leader of EY.
It’s about a positive news, in a scenario that is, however, quite dark. Analyzing the dynamics of loans to individuals, for example, these have grown by 3.9% in 2020 And 1.3% last year, while it is expected for the 2022 a decline of 3.2%. The dynamics are clear: in the last two years there has been an increase in loans to the private sector which is however slowing down due to rising inflation and geopolitical uncertainty. Bank lending growth is expected to slow down further to 1.1% in 2023, before reversing direction and rising back to 1.7% in 2024 and 2.4% in 2025.
The Italian economy it also faces the increase in the prices of energy and raw materials, with consequent risks of interruption of the chain from supplying from the businesses which will weigh on the demand for mortgages and loans to individuals, with one possible general reduction in consumption and the ability to investment.
Banks are doing well
Despite eight years of negative interest rates resulting in lower margins, banks in major European markets remain in a position of capital solidity and during the most difficult years of the pandemic, also thanks to the support of various government incentives, 750 billion euros in essential financial lines they were lent to businesses and households.
“In this context – adds Battista – for the Italian banking sector I am cautious optimism, having demonstrated good financial stability and resilience. It imposes itself some caution in the light of the first signs of uncertainty due to the geopolitical situation and inflation. This is a pivotal time when institutions financial and the political ruling class must continue to work together to find the right ones solutions in order to manage possible problems deriving from the conflict in Ukraine that could impact the economic system ”.
In 2020, business loansbacked by government guarantees, so grew by 5.8% (compared to -7.0% in 2019). This is the first year of business credit growth since 2011. However, as early as 2021 the loans contracted by 0.7%. The outlook for the credit businesses currently enjoy some positive aspects and the Italian economy should continue to do so grow this year and moderately next too, supported by PNRR funds and the reform program of the Draghi government. However, rising inflation and geopolitical tensions could have negative repercussions on the economy and private confidence and therefore risk weakening these supporting factors. Overall, business lending is projected to increase by 2.9% this year, but only by 0.7% in 2023.
On the other page: the dynamics of consumer credit and expectations for Npls