The reasons behind the increase in corporate deposits in November

By Leonidas Stergiou

This November is very similar to last year for business. But not for households. Net flows in corporate deposit accounts amounted to 2.1 billion euros, compared to -0.6 million euros in October. The households not only did not save, but received 224 million euros from the ready. At the same time, central government deposits were marginally negative (-3 million euros), while insurance funds increased by 1.8 billion euros.

The picture is complete when we look at the loans side, where in November there were net flows of financing to businesses 437 million euros, while households continued to repay loans that exceeded new loans by 77 million euros. The largest repayments concerned mortgages of 118 million euros, because in consumer, new loans exceeded the repayments by 35 million euros.

According to bank executives, the increase in consumer loans is mainly due to the car market, new mortgages that increase the purchase of household equipment, but also to meet needs such as the purchase of heating oil, taxes and debts to the Funds. In fact, credit cards were used for heating and taxes, due to the many interest-free installments.

Thus, the decline in household deposits appeared as an increase in corporate, central government and insurance fund deposits.

In business, the same pattern was presented last November and the main reason is the turnover in the last week of the month, due to Black Friday. The central government shows a decrease in deposits of 3 million euros, which is significantly less than that of 328 million in November 2020. The difference is due to the fact that tax payments were made this year, while support measures (against the pandemic and news against accuracy).

The difference is more pronounced in the deposits of the insurance funds, where the net flow this year was 1.8 billion, when in November last year it was negative by 30 million euros due to the pandemic and the support measures.

However, the lending side should be taken into account when analyzing deposits. Net loan disbursements (new loans less repayments) to businesses in November reached 437 million euros. This is one of the highest net disbursement amounts in the 12 months, which mainly concerned large companies.

These loans also include moves related to rising energy prices, stock markets in view of the holiday season and the preparation of investment plans. It is also indicative that out of the € 437 million, € 261 million in net funding went to the electricity, gas and water sectors. Other disbursements, at the level of 40-45 million euros, concerned the catering, hotels, trade and manufacturing sectors.

Therefore, the net increase in corporate deposits by 2.1 billion euros is partly due to net loan flows of 437 million euros and the increase in turnover, as happened last year. If the same pattern continues, December will be even better for businesses, as long as the same conditions apply as coronavirus protection measures.

For households, the forecast is difficult, as it “broke” the pattern of continuous growth, however, last December saw an increase due to the Christmas gift, which is paid in the private sector and other benefits. We should take into account the repayment of mortgages of 118 million euros, but also the demand for consumer loans of 35 million euros, in order to have the best possible picture of the net outflow of deposits of 224 million euros.

However, comparing the 11 months of 2021 with that of 2020, there is a net increase in household deposits by 5.8 billion euros this year (compared to 6.6 billion euros). In business, deposits increased in the 11 months of 2021 by 5.5 billion euros compared to 7.2 billion euros in the same period last year. In terms of loans, credit expansion to businesses remains marginally positive, while to households it is negative.

Finally, both the savings rate and the loan repayment rate show fatigue that is more evident in households.