Credit expansion nudges lower while term deposits see increase

With an apparent minimal impact from rising interest rates, credit to the private sector of the economy was up 19.9 percent in January, year-on-year, a slight slowdown from December’s 20.6 percent, according to data released by the Bank of Greece yesterday. In the first month of the year, the total debt of households and enterprises in the country totaled -179.4 billion, representing 92 percent of the country’s gross domestic product (GDP). Household debt (mortgages and consumer credit) was up 25.1 percent to -86.9 billion, or 44.6 percent of GDP. Mortgages, whose growth slowed from 25.5 percent in December to 21.8 percent in January, accounted for -57.9 billion. The growth of consumer credit, by contrast, accelerated from 23.9 percent in December 2006 to 24.1 percent in January 2007, reaching a total of -26.8 billion, of which -8.7 billion was accounted for by card credit. «Higher ECB interest rates exert a slight impact on credit expansion, as they affect consumers’ pockets but this is not particularly felt yet… We expect credit expansion to gradually slow,» said Piraeus Bank economist Michael Lambrianos. Total deposits at commercial banks totaled -171.9 billion, down 0.8 percent from December. However, for the first time term deposits slightly exceeded demand deposits, totaling -75.67 billion, against -75.32 billion. The average sum of consumer loans applied for was -10,000 and of mortgages -100,000. Depending on their credit risk management policy, banks as a whole reject about 10 percent of applications for mortgages and 30-45 percent of those for consumer loans. According to the central bank data, the percentage of non-performing loans fell from 6.3 percent at the end of 2005 to 5.4 percent at the end of last year. In the first nine months of 2006, the percentage was highest in consumer loans, 8 percent, which corresponded to loans worth about -2 billion. Non-performing mortgage loans represented 3.5 percent of the total, amounting to -1.9 billion. Earlier this month, the Bank of Greece asked banks to gradually lower the ratio of non-performing loans in their portfolios to 3.5 percent, reflecting the Basel II regulatory framework on capital adequacy. (Kathimerini, Reuters)

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