UBS Economics-European Economic Perspectives _Eurozone How is bank lendin...-118496405

ab27 October 2025Global ResearchEuropean Economic PerspectivesEurozone: How is bank lending holding up? Private credit growth steady in y/y terms (2.8%), but sequential pace is downMonetary and credit dynamics have been followed closely over the past three years to scrutinise the impact of ECB monetary policy tightening and subsequent easing. In this report, we analyse the newly released Eurozone monetary and credit data for September. The key message is that private sector credit growth was stable at 2.8% y/y in September, with loan growth to non-financial corporates (NFC) down by 0.1pp to 2.9% y/y, but loans to households up by 0.1pp to 2.6% y/y. However, sequential momentum in private sector loan growth (3-month moving average of m/m) has slowed - this will have to watched over the coming months. The growth rate of M3 slowed by 0.4pp to 2.9% y/y, but M1 was stable at 5.0% y/y. See annex for data, charts and concepts. Loans to NFC at 2.9% y/y (-0.1pp), loans to household at 2.6% (+0.1pp)Growth in total credit by Monetary and Financial Institutions (MFI) was up 0.2pp to 2.1% y/y in September. Public sector credit growth (previously dominated by QE) picked up by 0.5pp to 0.6% y/y, while private sector lending (adjusted for loan sales & securitisation) was unchanged at 2.8% y/y, with loans to NFCs down 0.1pp to 2.9% y/y and household loans up 0.1pp to 2.6% y/y. Within the household sector, both mortgages and consumer loans ticked up 0.1pp each to 2.6% y/y and 4.8% y/y, respectively (Fig. 1-16). The sequential momentum in private sector credit growth weakened, with the 3-month moving average of m/m growth down to 0.06% from 0.14%, as NFC credit moderated to 0.18% from 0.27%, while household credit was essentially unchanged at 0.21% (Fig. 17-24). Compared to the EZ aggregate of 2.8% y/y, private sector credit growth was particularly strong in Greece (11.8%) and Estonia (11.2%) and weak in Finland (0.2% y/y), Luxembourg (0.7%) and Germany (1.3%). (Fig. 57-76).Bank lending rates continue to fall EZ bank lending rates for new corporate loans most recently published by the ECB (August) fell by 6bp m/m to 3.46%, down 182bp from the peak in October 2023, but still up 210bp from the low in December 2021. Corporate lending rates are highest in the Baltic nations (4.25-4.80%) and Ireland (4.53%) and lowest in the Netherlands (3.06%) and Luxembourg (3.01%). The spread between small loans (<€1m, typically to SMEs) and larger loans (>€1m) rose 12bps to 0.59%, above historical lows, but still modestly below the 10-year average of 0.63%. Eurozone mortgage rates (volume-weighted) rose 3bps to 3.31%, down 72bp from the peak in November 2023, but up 201bps from the low in September 2021 (Fig. 83-86). Loan-to-deposit ratio at 92.9% in September, well below 2020 highPrivate sector deposit growth picked up by 0.1pp to 3.3% y/y in September. The Eurozone loan-to-deposit ratio rose by 0.1pp to 92.9%, well below the level of 104.