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Acquisition of financial assets and external financing in Germany in the first quarter of 2018

Acquisition of financial assets and external financing in Germany in the first quarter of 2018 Results of the financial accounts by sector

13.07.2018 | Deutsche Bundesbank DE

The financial assets of households in Germany stood at €5,875 billion at the end of the first quarter of 2018. Compared with the fourth quarter of 2017, this represents just a moderate increase of €14 billion, or 0.2%. In the first quarter, claims on insurance corporations grew in particular (€22 billion), followed by currency and deposits, which saw inflows totalling just under €15 billion. Although investment in shares and investment fund shares also expanded once more, German households still exhibited a preference for liquid investments and investments perceived as low risk. These transaction-related inflows to households’ financial assets were dampened by steep valuation losses. As liabilities grew by around €12 billion in the first quarter of 2018, net financial assets rose by just under €3 billion to €4,136 billion overall.

External financing of non-financial corporations in Germany amounted to around €64 billion in the first quarter of 2018; this primarily took the form of loans (just over €37 billion). Securities-based financing also showed a positive net result. Although net financial assets saw a rise in the reporting quarter, they remained in negative territory at -€1,743 billion.

Households: very strong acquisition of financial assets dampened by considerable valuation losses

In the first quarter of 2018, the transaction-related acquisition of financial assets by households reached one of its highest levels since 2000, amounting to €69 billion in net terms. In this context, households continued to exhibit a distinct preference for liquid investments as well as for investments perceived as low risk with currency and transferable deposits increasing by €15 billion and claims on insurance corporations even growing by €22 billion. By contrast, savings deposits and certificates were reduced once again.

Compared with the years following the outbreak of the financial and economic crisis, capital market exposure was also high in net terms – a trend that has been observed since 2014. Inflows to investment fund shares and to domestic listed shares totalling €10 billion and €4 billion, respectively, were especially significant in the first quarter. The acquired investment fund shares originated from mixed securities funds and real estate funds, amongst others. In comparison with bank deposits or claims on insurance corporations, listed shares and investment fund shares are generally considered to be riskier and, as a result, are acquired with the expectation of higher yields. Against this background, and despite households’ ongoing preference for liquid investments and investments perceived as low risk, the developments in capital market exposure suggest an increased awareness of yield over the past few years. Debt securities, on the other hand, were sold once again with rather modest outflows of €1 billion.

Notable valuation losses had a negative impact on households’ holdings of financial assets. These were partly due to lower prices for listed shares and investment fund shares. Alongside the transaction-related build-up, this led to a rise of financial assets of €14 billion to €5,875 billion in the reporting quarter.

External financing of households in Germany totalled just under €11 billion in the quarter under review, continuing the upward trend that first began in mid-2013. As in the past, the most significant sources of financing were domestic monetary financial institutions, which granted households primarily housing loans. Following a rise of just under €12 billion, or 0.7%, liabilities reached €1,739 billion at the end of the first quarter. As nominal gross domestic product (GDP) grew somewhat more strongly than debt in the reporting quarter, the debt ratio – defined as total liabilities as a percentage of nominal GDP (four-quarter moving sum) – fell slightly at the end of the first quarter to 52.8%. Overall, in combination with the growth in financial assets, this resulted in net financial assets increasing by just under €3 billion to €4,136 billion at the end of the quarter under review.

Non-financial corporations: somewhat weaker acquisition of financial assets amid increased external financing

In the first quarter of 2018, the transaction-related acquisition of financial assets by non-financial corporations was, at €47 billion, slightly lower than in the previous quarter. Alongside the acquisition of listed shares, other accounts receivable – which include trade credits and advances – also rose. While claims from debt securities and loans remained broadly unchanged in net terms, currency and deposits – and transferable deposits in particular – were scaled back with outflows of €12 billion. 

External financing of non-financial corporations was fairly strong at €64 billion, which was primarily attributable to loan-based financing totalling €37 billion (chiefly from domestic monetary financial institutions). Furthermore, almost €3 billion of debt securities were also issued. At less than €2 billion in net terms, the inflows of funds from issuing shares and other equity were limited. Other accounts payable – which include trade credits and advances – saw marked expansion, with inflows amounting to €20 billion. 

Taking valuation effects into account, net financial assets thus grew slightly by a total of about €82 billion in the first quarter, reaching -€1,743 billion. The debt ratio, defined as the sum of issued debt securities, loans and pension provisions as a percentage of nominal GDP (four-quarter moving sum), fell to 62.5% over the quarter under review because debt did not grow as strongly as nominal GDP.

Owing to interim data revisions of the financial accounts and national accounts, the figures stated in this press release are not directly comparable with those shown in earlier press releases.

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