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Decline in 3Q loan demand in Cyprus

04 December, 2013

Tightening of credit standards on loans to enterprises stabilised in the third quarter, while demand for loans by households and enterprises was lower compared with the previous quarter, the Central Bank of Cyprus said in its October Banking Lending Survey (BLS).
The net percentage of banks reporting a tightening of credit standards on loans was steady at 38%, lower than what was expected in the previous survey.
The tightening of credit standards for loans to households for house purchase and for consumer credit declined, for the second consecutive time, in the third quarter.
For the fourth quarter of 2013, the participating banks expect that credit standards for loans to households both for house purchase and consumer credit and other lending will also be stabilised.
The BLS showed a decline in demand for all loan categories by enterprises and households, but to a smaller extent than in the second quarter of 2013.
The banks expect that the demand for loans by enterprises and households in the fourth quarter is expected to decrease again, although to a lower degree than in the third quarter.
In the Eurozone, the October BLS confirmed the ongoing stabilisation in credit conditions for firms and households amid still weak loan demand.
Turning to loan demand, euro area banks continued to report a net decline in the demand for loans to enterprises in the third quarter of 2013, although to a lower degree than in the previous quarter (-12%, after -18%), thereby approaching the historical average for this indicator.
For housing loans, banks indicated a net increase in demand (to 5%, from -2% in the second quarter of 2013) for the first time since the fourth quarter of 2010, to a level well above its historical average.
The net demand for consumer credit turned marginally positive in the third quarter of 2013 (1%, after -7%), to a level which is now above its historical average.
For the fourth quarter of 2013, banks expect in net terms an increase in demand across all loan categories.