Credit Conditions Improve in CESEE as Banks Show Optimism Amid Economic Uncertainties

Credit Conditions Improve in CESEE as Banks Show Optimism Amid Economic Uncertainties

(IN BRIEF) The CESEE Bank Lending Survey by the European Investment Bank (EIB) reveals a recovery in credit demand and supply across Central Eastern and South-Eastern Europe, driven by increased consumer confidence and improved lending conditions, particularly for SMEs. Retail banking products like mortgages and consumer loans have seen strong demand, and corporate investment is expected to follow. While the banking sector shows resilience and significant market potential in countries like Czechia and Romania, cautious optimism remains due to global economic challenges. Access to funding is robust, but concerns about a potential rise in non-performing loans call for careful credit management in the coming months.

(PRESS RELEASE) LUXEMBOURG, 10-Dec-2024 — /EuropaWire/ — The banking sector in Central Eastern and South-Eastern Europe (CESEE) is showing signs of recovery following a prolonged period of tight credit conditions. A recent survey conducted by the European Investment Bank (EIB) highlights improved credit demand and supply across the region, suggesting growing confidence among banks, households, and businesses. However, cautious optimism prevails as challenges from global economic headwinds remain a concern.

The latest CESEE Bank Lending Survey, covering the second half of 2024, reveals encouraging trends. Banks are increasingly willing to lend, and households, along with businesses, are demonstrating stronger demand for credit. This marks a significant shift after two years of subdued activity in the lending market.

Kyriacos Kakouris, Vice President of the EIB, emphasized the importance of this recovery, stating, “While we welcome the positive developments in credit conditions, banks must remain vigilant as the region faces economic slowdowns among key trading partners. This survey underscores the resilience of CESEE’s banking sector and the critical need for forward-looking strategies.”

The report shows that the rise in credit demand is largely fueled by retail banking products, particularly mortgages and consumer loans. This signals renewed consumer confidence, which is expected to drive further growth in corporate investment in the coming months.

For the first time in two years, credit supply has shifted into positive territory. This improvement is particularly beneficial for small and medium-sized enterprises (SMEs), which have historically struggled with limited access to credit. The willingness of banks to lend to SMEs is a promising development for fostering business growth and investment.

The region’s market potential is deemed significant, with banks in countries like Czechia and Romania viewing growth opportunities as particularly high. This positive sentiment reflects a generally optimistic outlook for the CESEE region’s economic prospects.

EIB Chief Economist Debora Revoltella highlighted the broader context, noting, “The global outlook remains challenging, but the CESEE banking sector continues to exhibit resilience. Banks in the region are effectively navigating uncertainties while seeking opportunities for growth.”

Access to funding remains a strong point for subsidiary banks in the region, with retail deposits playing a critical role in maintaining a favorable funding environment. This robust funding base, supported by both retail and corporate deposits, positions banks well to sustain lending and contribute to regional economic stability. Despite this, concerns about a potential rise in non-performing loans (NPLs) in the next six months underline the need for cautious credit management.

The survey’s findings provide valuable insights for financial institutions operating in CESEE, offering a roadmap to navigate the complexities of the market while capitalizing on emerging opportunities.

The complete CESEE Bank Lending Survey report is available [here].

Background information

The European Investment Bank (ElB) is the long-term lending institution of the European Union, owned by its Member States. It finances investments that contribute to EU policy objectives. EIB projects bolster competitiveness, drive innovation, promote sustainable development, enhance social and territorial cohesion, and support a just and swift transition to climate neutrality.

The EIB Group, which also includes the European Investment Fund (EIF), signed a total of €88 billion in new financing for over 900 projects in 2023. These commitments are expected to mobilise around €320 billion in investment, supporting 400 000 companies and 5.4 million jobs.

All projects financed by the EIB Group are in line with the Paris Climate Accord. The EIB Group does not fund investments in fossil fuels. We are on track to deliver on our commitment to support  €1 trillion in climate and environmental sustainability investment in the decade to 2030 as pledged in our Climate Bank Roadmap. Over half of the EIB Group’s annual financing supports projects directly contributing to climate change mitigation, adaptation, and a healthier environment.

Approximately half of the EIB’s financing within the European Union is directed towards cohesion regions, where per capita income is lower. This underscores the Bank’s commitment to fostering inclusive growth and the convergence of living standards.

About the CESEE Bank Lending Survey

The CESEE Bank Lending Survey was developed in the context of the Vienna Initiative 2.0 to monitor cross-border banking activities, understand credit dynamics, and gain insights into the business strategies and market expectations of banks operating in Central, Eastern and South-Eastern Europe. The survey is administered by the European Investment Bank.

Media Contact:

Sertore Serena
s.sertore@eib.org
+352 4379 – 70859

Press Office

press@eib.org
+352 43791

SOURCE: European Investment Bank