The currently difficult environment for many companies will lead to an increase in loan defaults, but not in the next few months.

That's what Thomas Groß, CEO of Landesbank Hessen-Thüringen (Helaba), said in an interview with the financial news agency Bloomberg.

In addition, credit lines would be used to a greater extent.

For his own house, however, he expects only moderate burdens in the next two years.

"I assume that given the more difficult economic environment and high inflation, we will see more defaults in the future." However, Groß does not expect the peak to be in the second half of this year, but rather in 2023 and 2024. He cited this as an example the real estate sector, where an economic slowdown is showing a delay.

Gross expects the first outages in the commercial and residential segment in the next six to nine months, but there will probably be more in 18 to 24 months.

Groß is also forecasting more failures in industry, especially among smaller companies.

"These companies cannot avoid high energy prices as well - for example by relocating production to other markets - as large corporations," he explained.

A growing number of economists are predicting a recession in the euro area in the coming quarters as the rising cost of living depresses demand.

Added to this are the dwindling Russian energy supplies and high electricity prices, which are hitting the economy.

Risk provisions increased

According to Groß, it can currently be observed that companies are making greater use of their credit lines.

"One is to build up inventories due to ongoing supply shortages, the other is to deal with the increased energy prices," he said.

According to him, Helaba has not tightened its lending standards since the beginning of the war in Ukraine.

The lending business as a whole has not been reduced either.

"We have not set individual sectors to yellow or red," said Groß.

"We take a detailed look at our own customers, regardless of industry, and then make our decisions."

So far, there have not been any larger, more specific loan defaults, says Groß.

The development of the German economy is more robust than assumed at the beginning of the war.

That's why Helaba decided last month to issue a forecast for the year as a whole.

Accordingly, it expects consolidated earnings before taxes of over 500 million euros, provided there are no massive upheavals.

In the first half of the year, she had earned 327 million euros, a tenth more than in the same period last year, and made 85 million euros in risk provisions.

"I expect only a moderate burden from defaulting loans at Helaba due to the good portfolio quality for the next two years," said the Helaba boss.

"With our adequately endowed risk provisions in the last two years, we have also built up a sufficiently good cushion for this."