Banks are now as profitable as they were before the pandemic and their balance sheets remain solid. According to our latest Bank Lending Survey, loan demand by firms increased strongly in the last quarter of 2021. This was driven by both higher working capital needs, stemming from supply bottlenecks, and increased financing of longer-term investment.
In addition, banks continue to hold an overall benign view of credit risks, mainly because of their positive assessment of the economic outlook. Conclusion Summing up, the euro area economy continues to recover, but growth is expected to remain subdued in the first quarter.