The ECB’s loan conditions are expected to have indicated certain improvement in the fourth quarter, although with persistent concerns. The bank lending survey of ECB in October indicated a diverging trend between loans for housing and for enterprises. The data was quite encouraging for the former segment; however, the loans for enterprises segment was struggling to take off.

According to a Societe Generale research report, an improved picture is expected in the fourth quarter survey. Most softness is expected to be seen in peripheral nations. There are two main concerns regarding bank loan take-up. Firstly, there are worries about fragmentation, with most of the new loans in the euro area coming disproportionately from the two biggest nations.

This is in spite of the fact that discrepancies in interest rates between peripheral nations and core nations have significantly narrowed. Secondly, the ECB CSPP program that began in June 2016 has set off a solid rebound in corporate bond issuance that is a drag on the flow of bank loans to huge companies. The fourth quarter lending survey is unlikely to show much to assuage those worries, stated Societe Generale.

The outlook might rebound in the medium-term though. Investment appears set to increase, not least because the construction sector appears to have bottomed out, while NFCs should benefit as the output gap closes, demand continues to be resilient and inflation rises, added Societe Generale.