Eurozone Bank Lending Survey: Improvement continues

The ECB just published the euro area Bank Lending Survey (BLS) for the
first quarter. The survey was conducted on a sample of 120 banks
between 6 December 2010 and 10 January 2011. These are the highlights:
* In 4Q 2010, the tightening of credit standards on loans to NFCs
came to a halt, meaning that the sum of the percentage of banks
reporting that standards "tightened considerably" and
"tightened somewhat" was equal to the sum of the percentage of
banks for which standards "eased somewhat" and "eased
considerably". We recall that credit standards on corporate
loans have been tightened steadily since the summer of 2007, so
today's indication is encouraging.

* Credit standards on loans to households were tightened further.
This is a bit disappointing, considering that in the previous
quarter the net tightening was zero. In particular, the net
tightening for mortgages rose to +11 vs. 0, while it was up to +2
vs. 0 for consumer credit.

* The loan demand picture continues to improve, both for corporates
and households. In particular, net corporate loan demand for fixed
investment stopped declining after eleven consecutive quarters, an
encouraging sign because this variable closely tracks the
investment cycle. This provides further support to our view of an
increasingly sustainable investment recovery. Net demand for
mortgages increased markedly, to +23 vs. +10, confirming that
housing demand is on a slow but steady recovery trend. This is
consistent with our forecast that housing investment (which reacts
to demand shocks with a lag) will probably stop shrinking in 2H
2011. Net demand for consumer credit remained negative, though
improving somewhat (-2 vs. -6).

* Banks expect a very slight further net tightening of standards for
all loan categories in the current quarter.
Bottom line: Although banks have not yet started easing credit
standards, signs of improvement in the lending cycle continue to
emerge in tandem with gradually firming demand prospects. This bodes
well for the broadening of the euro area recovery. However, this is
unlikely to be enough for the ECB to seriously start considering a
rate hike soon. The ECB tightening cycle should begin only towards
year-end.
Source: Fxstreet.com