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Inflation in Luxembourg Does the rise in interest rates benefit the banks?
LUXEMBOURG – The increases in key rates are weighing on demand for loans but are strongly boosting the interest margin of banks in Luxembourg, notes Statec.
Banks, big winners from the rise in interest rates.
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Inflationary pressures prompted central banks to raise their key rates sharply and quickly, in order to moderate demand and contain inflation expectations. The National Institute of Statistics and Economic Studies (Statec) decrypts this Friday the impact of this rise in interest rates for banks.
“All the banks surveyed in Luxembourg noted a drop in demand for mortgages in the last quarter of 2022, explains Statec. The amount of new fixed-rate mortgages and business loans granted by Luxembourg banks fell by 40% and 23% respectively over one year in the 4th quarter of 2022”.
In addition, these rate increases, combined with a small increase in stock market valuations, weigh on the growth of net commissions (+9% in 2022 then +2% in 2023), notes the institute.
On the other hand, the increases in key rates “strongly boost” the interest margin of banks in Luxembourg, which should increase by 37% in 2022 and 26% in 2023, he notes. “Banks should however face a more pronounced increase in personnel costs and the cost of credit risk, which will further weigh on their net results in 2023”, concludes Statec.
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