Banks’ profitability may be moving higher but banking institutions are not functioning as they should, at least in terms of credit expansion, which is one of the core operations that can ensure them healthy and significant profitability in times of growth like the current one.
Banks’ profitability comes mainly from increased interest due to rising interest rates and high fees. But interest rates will fall and this is expected to affect their revenue.
Banks have estimated a credit expansion of 5-6 billion euros in 2024 and at the end of March they recorded a positive expansion in the private sector totaling 44 million euros.
Similar cases have existed in the past, for instance in 2023, but positive performance in December contributed to meeting the targets.
However, it is a common secret that the credit expansion of the banks is mainly “pushed” by the RRF in terms of large businesses and programs such as my house in terms of housing loans.
Less housing loans
High construction activity is not accompanied by a corresponding explosion of housing credit.
Mortgages remain stable despite the strong economic growth and a booming real estate market.
During the five-year period 2019-2023, banks proceeded with net financing to businesses amounting to 24.57 billion euros, while in the same period the net flows of new housing loans stood at -6.8 billion euros.
Net flows include new lending minus repayments of older loans. Therefore, as far as housing credit is concerned, the new loans granted for the purchase of houses in the last 5 years were 6.8 billion lower than the loans repaid in the same period.
