By Rob Starr, Content Manager, Big4.com
While the economic forecast for the Eurozone in 2013 shows painful progress towards stability, Eurozone banks and insurers will face another difficult year. The north-south divide will become more entrenched this year; while the outlook for lending in northern markets is slowly improving, the outlook for southern markets is bleak as banks contend with a recession-driven glut of non-performing loans and continued regulatory pressures, according to the Ernst & Young Eurozone Financial Services Forecast (EEFSF) released recently.
Banks are just two-thirds through the process of deleveraging, with €132b of further loan book shrinkage expected in 2013. Average loan to deposit levels will have fallen from a pre-crisis peak of 124% in 2006 to an estimated 111% at the end of 2012, and this process has further to go, with the ratio likely to fall to 104% in 2016. As a consequence loan books remain under pressure.
The outlook for lending to business in 2013 shows lending is to increase in France, Germany and the Netherlands by 1-2.5% and decrease in Italy by 0.5% and Spain by 4%. However, when comparing the figures over a two-year period (2011 figures against the outlook for 2013) shows that the north-south divide is becoming entrenched. Lending in France, Germany and the Netherlands has increased by €18b, €72b and €28b respectively over two years, whereas lending in Italy will have fallen by €43b and in Spain by €100b over the same time period.