The Czech National Bank’s latest snapshot of bank loans released on Tuesday provides some cautious grounds for optimism concerning the recovery and growth of local companies after the long recession.
The main message from the Czech National Bank survey of the biggest banks’ behavior in the last quarter of 2013 and their expectations for the first three months of 2014, is that companies are borrowing more and show every sign of continuing to do so.
That, according to some economists, is further proof, if it were needed, that the credit squeeze that hurt many companies came to an end sometime around mid-2013 and the financial reins have been loosened since.
A further slight easing of loan conditions seems to have continued into the end of 2013, according to the survey, with slight falls in bank margins on corporate loans and some relaxation of the guarantees they seek from firms to make sure they get their money back. No major changes here are expected for the start of 2014.
The picture is a lot more mixed for loans to the general public. Demand for home loans climbed in the last quarter of 2013 in spite of tighter loan conditions, which are expected to ease a bit at the start of 2014.
Demand for consumer loans decreased at the end of 2013 and some banks expect to get stricter on such loans from the start of 2014. The message here seems to be that many Czechs are still cautious about their job, earnings and other prospects and are as cautious about taking out personal loans as banks are about providing them.
With levels of home loans seen stagnating in the first quarter of 2014, normally a lean period for the housing market, company loans look like being the only bright spot as bankers set about hitting their 2014 annual targets.
One side remark from the survey worth remarking on is that many large Czech companies are now in the market for long term loans. The need to finance mergers and acquisitions is a major factor here.
That suggests the fairly buoyant merger and acquisition business will continue. The number of major acquisitions in the Czech Republic hit a five year high with 76 deals worth just over 100 million crowns, according to figures from consultancy company TPA Horwath. Transactions sunk to a low of 51 in 2012.
One factor encouraging deals is that many Czech companies are finding the local market too small for their ambitions. Another has been the desire for foreign firms to cash in their Czech assets to ease the debt burden of mother companies, according to the consultancy.
After several years with zero deals, Czech banks were the subject of four acquisitions in 2013. Whether that’s good or bad news for the rest of the country and most Czechs is not covered by the consultancy or the central bank survey.
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