Credit contraction accelerated in July

Latest BoG data depict an acceleration of credit contraction in the Greek banking market to 4.8% y-o-y in July from 4.3% in June with balances reaching €234.4bn corresponding to 111.9% of GDP. Loan balances eased 2.4% m-o-m with net flow resuming its downward trend with extended deductions of €1.4bn in July, from additions of €0.85bn in June and outflows of €0.94m in May.

Corporate lending outstanding balances slipped 2.2% m-o-m and 5.3% y-o-y (Jun: -4.1% y-o-y) to €112.1bn, Monthly net flow turned negative with deductions of €0.94bn in July from additions of €1.07bn in June and deductions of €0.54bn in May.

Loans to sole proprietors stood at €13.9bn, down 7.5% m-o-m and 5.3% y-o-y. Monthly flow remained at low levels with outflows of €33m in July from additions of €49m in June and deductions of €25m in May.

Individuals & private non-profit institutions’ lending growth retained its downward trend, with balances reaching €108.4bn, down 2.0% m-o-m and 4.3% y-o-y. Monthly net deductions continued unabated for twenty-eighth consecutive month at €0.46bn in July from €0.26bn in June and €0.37bn in May.

Outstanding balances in housing loans contracted 1.6% m-o-m and 3.5% y-o-y to €75.7bn. Deductions continued for twenty-fourth month in a row at €0.29bn in July from €0.11bn in June and €0.26bn in May. Consumer credit slipped 2.8% m-o-m and 5.9% y-o-y to €30.9bn. Monthly net deductions remained almost flat m-o-m at €0.16bn.

Lending constraints of Greek banks and tight liquidity conditions coupled with the prevailing macro uncertainty and consumers’ reluctance to involve in any lending activity are expected to retain, in my view, lending growth at negative levels, hovering at 4-5% in the coming months, on continuing outflows in the household lending sector, while corporate lending flow volatility is expected to be maintained.

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