The banks are already moaning that their new lending business has plummeted since the middle of the year.

Particularly in mortgage lending, the sharp rise in interest rates, escalating inflation, the uncertainty before the recession and the persistently high real estate prices are causing less demand for loans from bank customers.

In a study presented on Monday, the experts at the auditing and consulting firm EY forecast a particularly sharp decline in lending to companies of 2.9 percent in the coming year.

The minus is thus stronger than in other large euro countries.

The consultants expect there to be 2.7 percent fewer corporate loans.

Markus Fruehauf

Editor in Business.

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Overall, according to their forecast, the lending business in Germany should fall by 1.7 percent to 3,273 billion euros.

The German economy is facing a recession and the boom in the real estate market is coming to an end.

This has an impact on the demand for bank loans.

According to EY, real estate loans in Germany will increase by a total of 6.2 percent in the current year - and thus more than in the euro zone as a whole, where only a plus of 4.9 percent is forecast.

With the turnaround in interest rates, however, demand is falling - for the coming year, a decline in the portfolio of real estate loans by 0.1 percent is expected in Germany, for the entire euro zone, on the other hand, growth of 0.5 percent.

Real estate appears to be overvalued

The sharp rise in interest rates slowed demand for real estate loans, and real estate, whose prices had risen by 35 percent between the first quarter of 2019 and mid-2022, now appears overvalued in many regions, says Robert Melnyk, head of banking and capital markets at EY Financial Services .

"Lending to real estate customers will decline in 2022 as a whole, after a strong first half of the year," said Georg Reutter, President of the Association of German Pfandbrief Banks (VDP) last week in Berlin.

At the beginning of the year, according to the CEO of DZ Hyp, many customers secured interest rates that were still low.

According to his estimate, the decline in lending is likely to continue at least until mid-2023.

After record growth of 7.3 percent in corporate loans this year, bank business will also decline significantly here.

In addition to the minus of 2.9 percent, there is a risk of higher loan defaults.

More and more private individuals and companies will no longer be able to service their loans in the coming year - the proportion of non-performing loans in the total loan volume is expected to increase from the current 1.2 to 2.3 percent in 2023, the EY consultants predict.

An increase from 2.6 to 3.3 percent is expected for the entire euro zone in the coming year.

"The banks have to be prepared for the fact that the number of corporate insolvencies will increase again if we get into a recession," said Thomas Griess, Managing Partner Financial Services Germany at EY.

However, the German institutions would be able to cope with this without any problems, their equity buffers are more than sufficient.