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Sharp increase in loans to households
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Reduced prospects of cut in European Central Bank official rate brings rise in interest rates.
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Interest rates on bank loans and credits generally rose slightly in August. As a result, the composite reference rate at banks and savings banks rose by 9 basis points to 3.84%, somewhat below that twelve months earlier. The rise in bank rates came following disappearance of prospects of a cut in the European Central Bank official rate.
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Housing loan rate also moves up slightly.
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In addition, the interest rate on mortgage loans held at 3.2% in September 2005.
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As a result, it stood 17 basis points below the same month in 2004.
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Funding of private sector growing at twice rate seen in euro area.
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Funding of the private sector continued to rise at a strong rate. In August, loans to companies and households showed growth of 18.6% compared with the same month last year, some 2.5 points more than the annual rate recorded in December. Demand for finance was boosted by the good economic climate and easy borrowing conditions. As a result, funding going to companies and households, including loans from the financial system, both domestic and foreign, securitizations and bond issues (but not share issues) grew at the highest rate since September 2000, doubling the rate for the euro area as a whole. The biggest year-to-year increase came in loans to households (20.3%), slightly higher than that recorded in previous months. Mortgage loans continued to boost financing to households.
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With regard to funds obtained by non-financial companies, this figure rose by 17.1% compared with the same month in 2004. Of total funding, credit granted to non-financial companies by resident credit institutions and securitization funds rose by 22.0% in the past year.
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Bank deposits continue to grow at high rate
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Funding of private sector growing at twice rate seen in euro area.
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Total deposits of companies and households continued to rise at a sharp rate in August compared with the same month last year and much more rapidly that in the euro area. Nevertheless, the increase in absolute terms in the past 12 months was notably lower than in the case of loans. In order to compensate this difference in balances, the credit institutions issued bonds or had recourse to foreign markets.
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Private sector deposits grow more than in euro area but less than loans.
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On the other hand, the new accounting regulations for credit institutions came into force in June as a result of adoption by the European Union of the International Financial Information Regulations relating to application of the International Accounting Standards. As a result, the balance of time deposits, mainly long-term deposits, was increased as a cross-entry for the return to the balance sheet of some securitized assets which had been removed when the previous regulations were in force. As a result, the year-to-year increase in time deposits and in the total appear to be overvalued. Nevertheless, there is no doubt that the biggest annual increase came in time deposits for more than two years which enjoy a tax benefit of 40% on interest. Deposits in currencies other than the euro also showed a big increase. In addition, on-demand and savings accounts showed a considerable rise of 11.7%.
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With regard to bank deposit interest rates for the private sector, these scarcely rose in August holding at very low levels. The composite interest rate for non-financial companies rose by 7 hundredths to 1.23%, some 4 basis points above one year earlier. The composite rate for households rose by 3 basis points to 1.14% to stand at the same level as 12 months earlier.
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Assets of securities mutual funds rose by 3.5 billion euros in September going to 242.07 billion euros, showing growth of 13.8% over the same month last year, according to Inverco, the sector organization. This increase in assets may be attributed to major capital gains due to the good performance on the stock markets during the month and also to net subscriptions to shares (after deducting sales) of 1.08 billion euros. The biggest inflows of new money in September went into global funds, guaranteed bond-based funds and European share-based funds. On the other hand, the funds to mark up the biggest withdrawals were money-market funds, guaranteed share-based funds and short-term bond-based funds. However, in the January-September period net subscriptions were concentrated on short-term bond-based funds (for an amount of 6.08 billion euros), some 43% of the total, thus reflecting the risk aversion stand among many savers.
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On-demand and savings accounts up 12% in past 12 months.
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The total number of participants in securities mutual funds rose to 8,341,634 at the end of September. As a result, there was an increase of 4.7% in the past 12 months. In this period, the types of fund to show most growth in number of participants were guaranteed bond-based funds and national share-based funds, with year-to-year increases of 20.6% and 14.2% respectively.
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The average annual weighted yield obtained by securities mutual funds was 6.1%, substantially above inflation. While all types of securities mutual fund recorded positive annual yields there was a wide range. Whereas international share-based funds in emerging markets reported an extraordinary annual yield of 55.5% and national share-based funds showed 35.6%, money-market funds earned only 1.2%.
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Biggest inflows of new money into securities mutual funds in September go into global funds, guaranteed bond-based funds and European share-based funds.
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Total assets of securities mutual funds (SICAV and SIM) amounted to 26.9 billion euros at the end of July 2005. The number of shareholders on June 30, 2005 was 395,412.
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Securities mutual funds mark up average annual yield of 6.1%, substantially above inflation.
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In turn, as a result of the real-estate boom, real-estate mutual funds have shown major growth. The assets of this type of investment fund at the end of September amounted to 6.02 billion euros, an increase of 37.6% over December. The number of participants was 126,566, an increase of 19.1% so far this year. The annual average weighted yield for the past year was 5.7%.
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