Italian bank loans to firms fall as demand weakens: central bank

(Reuters) – Bank loans to companies in Italy declined sharply between November and February as demand weakened and interest rates rose, the Bank of Italy said on Friday.

In the three months to February loans to the non-financial sector fell overall by 3.2% year-on-year, driven down by 7.5% drop in credit to companies, the Bank of Italy said in its quarterly bulletin.

The contraction in lending to firms “reflects a broad weakening in all sectors, and in particular the service sector,” the bulletin said, citing higher funding costs for banks and more stringent lending criteria.

Between November and February the average interest rate on new bank loans to firms increased by 60 basis points (0.6%) to 3.6%, the central bank said.

Loans to families in the three months to February edged down by 0.1% year-on-year, as demand for house mortgages declined, it added.

The bulletin also estimated that the Italian economy probably posted “slight growth” in the first quarter of this year compared with the previous three months, after shrinking 0.1% at the end of last year.

Statistics bureau ISTAT will issue a flash estimate of first quarter gross domestic product on April 28.

(Reporting by Alberto Chiumento, Luca Fratangelo, editing by Gavin Jones and)