Press Release from 2025-01-27 / Group, KfW Research

KfW Research: New lending business grows for the first time in two years

  • Corporate loans increased by 1.6% in the third quarter of 2024
  • But the recovery is likely to level off
  • Falling interest rates are the primary driver of credit demand

In the third quarter of 2024, new lending from banks to the corporate sector grew again for the first time in two years. The growth rate calculated by KfW Research was 1.6% year on year. But the rise was partly due to a base effect, since new lending in the third quarter of 2023 fell sharply at the same time as interest rates peaked.

These are the findings of the Credit Market Outlook which KfW Research publishes every quarter.

The volume of new lending grew for the third straight quarter, stabilising above the pre-pandemic level of 2019. On an inflation-adjusted basis, however, the real value of credit volume was lower than in 2019.

“The recovery of new lending business will level off because of the persistently difficult economic environment”,

predicted Dr Jenny Körner, credit market expert at KfW Research.

“We expect new lending to businesses and self-employed people to grow by just under 2.6% in the fourth quarter compared with the same quarter last year. After that, the growth rate will presumably settle down at around 2%.”

The announcements of the incoming US administration on trade policy likely created pull-forward effects in the fourth quarter. Businesses borrowed more and brought forward business transactions in a bid to pre-empt a potential imposition of tariffs by the administration of Donald Trump. But it is foreseeable that this effect will decrease.

The base effect resulting from the low lending volume in 2023 likely acted as an additional stabilising factor for the growth rate in the fourth quarter, as did the further interest rate cuts. They will likely be the main driver of new lending this year as well. Unlike in 2024, the more favourable financing costs should prevent a drop in business investment in a year-on-year comparison. KfW Research expects nominal investment expenditure to rise by just under 2%, which will moderately contribute to growth in new lending business.

“The uncertainty around the direction of US trade policy poses a downside risk for our forecast for this year. In contrast, swift measures by the new German Federal Government to address the structural problems in Germany could lift business sentiment and generate more interest in loans”,

said Dr Jenny Körner.

Note: KfW Research calculates the quarterly KfW Credit Market Outlook exclusively for the German business newspaper Handelsblatt. The current edition is available at www.kfw.de/kreditmarktausblick