Image: VOLKER Weihbold
In the fight against inflation, the European Central Bank has been raising interest rates since the middle of last year. The key interest rate – currently at 3.75 percent – will continue to rise.
As a result of the increase, lending rates have risen considerably, which has an impact on demand. “The sharp increase in interest rates means that there is a decline in bank loans for households, but also for companies,” said the Deputy Governor of the Oesterreichische Nationalbank (OeNB), Gottfried Haber, at the presentation of the latest financial market stability report.
But you also have to take into account that there had been an enormous increase in lending in the previous years. The decline is also less pronounced for companies, as they still need liquidity for inventory and working capital financing. In the past ten years, 86 percent of loans granted to companies have been variable rate loans. However, this is not yet causing the OeNB any major concerns. While corporate debt has increased overall, profits have increased even more.
The banks achieved record profits totaling 10.2 billion euros last year. Nevertheless, Haber advises them to strengthen their capital base and to hold back on profit distributions.
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