*European Banks: The Big Picture
Loan growth remains weak, but with pockets of growth: Volumes remain subdued, but there are some signs of a recovery for corporate lending in France and Germany. Encouragingly, the loan shrinkage in the periphery could be showing signs of turning the corner. Loan demand continues to improve across Europe: Whilst actual loan growth remains weak, demand continues to improve, especially for corporate loans. On a footprint-weighted basis, Italian and Spanish banks, as well as ING in the core, appear most exposed to improving demand data. Deposit growth tepid, but with a pronounced mix shift: Deposit growth remains low in most countries, but the shift of term deposits into cheaper overnight deposits continues in general. We see this most strongly in Spain and the UK. Continued weakness in lending margins: New lending margins are falling fastest in Germany and the Netherlands, and appear to be tapering-off in the UK, Spain and Italy. Norwegian margins appear the most robust for now. It is possible that the ongoing shift towards cheaper overnight deposits is cushioning some of the margin headwinds from QE / low-rates.