The Italian credit market is sending a positive signal: The total volume of loans granted to the private sector reached 1,644,225 million euros in May 2024. According to the monthly report from the Italian Banking Association (ABI), this is the highest level since May 2022. This trend points to a slight uptick in economic activity among businesses and households.
Falling interest rates are boosting demand
A key driver of this trend is the terms for new loans, which have recently improved significantly for borrowers. The average interest rate on new mortgage loans fell to 3.61 percent in May. By comparison, this figure stood at 3.67 percent in April and was as high as 4.42 percent in December 2023. Businesses also benefited from more favorable terms: the average interest rate for new business loans fell to 5.27 percent, down from 5.30 percent the previous month.
In total, the loan portfolio consisted of 619,063 million euros for non-financial corporations and 627,181 million euros for households. The average interest rate on the total outstanding loan portfolio remained stable at 4.79 percent in May.
Year-over-year comparison shows a modest trend
Despite the positive monthly results, a look at the year-over-year data reveals a more nuanced picture. The annual growth rate of loans to the private sector remained negative in May at -2.4 percent, although it improved slightly compared with April (-2.5 percent). Total deposits from bank customers also recorded a slight year-over-year decline of 1.7 percent to 1,841,972 million euros. However, bank financing through bonds provides a strong counterbalance: Here, the ABI recorded robust year-over-year growth of 21.9 percent in May, indicating that banks were able to raise capital effectively.
