Banks want to check real estate loans more rigorously

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Whe has big plans should hurry up with their funding. The monetary policy of the European Central Bank does not expect rising interest rates for the time being. However, there are increasing signs that banks are becoming more cautious when it comes to lending. The previous week, the F.A.Z. reports that this applies to corporate loans. But also in real estate and installment loans, many banks expect in the next few months, a stricter procurement practice, as evidenced by a survey submitted on Monday by the auditing firm EY.

Tim Kanning

120 banks and 30 young financial companies (Fintechs) have interviewed the auditors. After all, 27 percent of them expect the conditions for real estate and installment loans to go up. 34 percent of them expect this for corporate loans. More than half of the respondents expect banks to become more restrictive in lending to companies in the next six months. In the previous survey in April 2018, this expectation had been expressed by only 6 percent of participants.

The background is the growing economic worries. Due to the already very long-lasting bright economy in Germany, the banks had to cover almost no risk provision for the possible default of loans for years. Many corporate customers did not have to lend more collateral recently, real estate purchases, which were financed to 100 per cent on pump, are no longer a rarity. However, banks' awareness of risk slowly seems to be growing again – if only because the banking supervision of Bafin and the Bundesbank is now taking the issue more seriously again. In April 2018, two-thirds of the respondents had stated that they expected an improvement in the economic situation in Germany, while in the current survey just as many participants stated that they expect the situation to worsen.

Car industry is getting harder on loans

Above all, sectors whose business is heavily dependent on the economic situation are already finding it harder to make loans, as Kai Frömert, Managing Director of the investment finance firm FCF, which specializes in corporate finance, told F.A.Z. said. On Monday, the cooperative headquarter DZ Bank announced that it would examine credit exposures more intensively in some segments. "The manufacturing sector is already clearly feeling the slowdown in the international environment. This affects, inter alia, the automotive industry, mechanical engineering, the chemical and pharmaceutical industries, "said Uwe Berghaus, corporate customer board member of DZ Bank, told the news agency Bloomberg.

Landesbank Baden-Württemberg and Hamburg Commercial Bank had also been more cautious recently. The picture is not uniform yet. The Commerzbank wants to continue lending expansively, but of course they comply with their procurement standards, as a spokesman on Monday at the request of F.A.Z. said. According to a spokesman, Deutsche Bank is also currently not planning to reduce its lending in cyclical sectors.

All in all, the banks interviewed by EY still rate their current business situation as positive. However, the outlook for the next twelve months has worsened significantly compared to the spring 2018 survey. At 9 percent, not even half as many respondents expect a very positive business development. A quarter expect their business situation to deteriorate after 7 percent in 2018.

In addition to the weakening economy, it is above all the ongoing low-interest phase, which worries the banks. It is well known that many institutions have passed on ECB pressure in the form of higher fees to their clients. Above all the costs around the checking account, but also for transfers are here popular adjusting screws. However, there are still a large number of credit institutions that can avoid such additional costs for customers. After all, 84 percent of respondents in the survey said they had not raised their private customers' fees this year, nor did they plan to do so.

In order to reduce the cost pressure, many institutes continue to plan job cuts. Especially prominent are Deutsche Bank and Commerzbank, which each want to delete several thousand jobs. According to the survey, especially in the branches and other departments with customer contact is reduced. On the other hand, however, risk management, IT and other key areas are also being discontinued. The Volksbanks have been trying for years to better deal with regulation and other challenges through mergers. On a large scale, however, Deutsche Bank and Commerzbank were unable to achieve a merger last time. Nonetheless, one in three respondents expect significant consolidation over the next three years.

(dayToTranslate) F.A.Z. (t) Commerzbank (t) ISIN_DE000CBK1001 (t) Deutsche Bank (t) ISIN_DE0005140008 (t) DZ Bank AG (t) ECB

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