Ratings agency Fitch casting their eye over the ECB's Targetted Long-Term Refinancing Operations

  • failing to provide the intended stimulus but helping to reverse the loan contraction that began in 2012

A total of €400bln of TLTROs have been issued since their launch in Sept 2014 but the bulk of lending to Eurozone non-financial corps has remained flat over the year

Eurozone banks initially borrowed heavily under the TLTRO scheme but used the funds primarily to repay maturing the 3-year LTROs taken out in 2011 and 2012 but TLTRO borrowing currently represents between 4% and 5% of total bank sector funding in Portugal, Spain, Italy and Greece, which Fitch views as modest.

ECB gov council member Rimsevics earlier warned that that QE from CBs wasn't working generally, a view I share

More from Fitch:

Northern European banks have been more effective in injecting TLTRO funding into new corporate lending compared with southern European peers, despite lower take-up, in our opinion.

This is largely because credit demand is picking up in these countries and because the benchmark mechanism bound TLTRO utilisation to new loan issuances from September 2014 while for most banks in southern Europe which had been deleveraging only from April 2015. In the first eight months of 2015, bank loans to non-financial corporations grew in France (up 1.9%), Netherlands (up 1.2%) and Germany (up 1.4%). The opposite is true for Southern European banks where loans are contracting in Spain (down 3.9%), Italy (down 0.7%), Portugal (down 1.9%) and Greece (down 5.9%).

Fitch's baseline GDP growth forecast for the eurozone is 1.6% in 2015-2017. We expect eurozone bank lending to improve in the coming months, mostly driven by more favourable economic prospects, which should translate into stronger loan demand and more opportunities for banks to expand lending without compromising asset quality.

Despite stronger growth prospects, loan demand is still far from robust and take-up of forthcoming TLTRO issues is likely to be modest. This is also because eurozone banks generally hold ample liquidity buffers, meaning that the TLTRO's impact on lending, while positive, will remain limited.