Acquisition of financial assets and external financing in Germany in the second quarter of 2016 Results of the financial accounts by sector
At the end of the second quarter of 2016, households' financial assets amounted to €5,401 billion; this figure was €44 billion (or 0.8%) higher than in the first quarter of 2016. This increase lay within the long-term average, despite slight valuation losses of almost €4 billion on financial assets, with shares being most affected. The transaction-related acquisition of financial assets, amounting to just under €48 billion, was thus comparatively strong and continued the upward trend of the last three years. As in the preceding quarters, the continuing preference for liquid and low-risk assets was accompanied by significant investment in equities and investment fund shares, which points to a continuing increase in yield awareness in the quarter under review. At the same time, households’ liabilities went up by just under €16 billion, which meant that, overall, their net financial assets rose moderately to €3,756 billion, increasing by €28 billion (0.8%). Net financial assets of non-financial corporations rose slightly by €43 billion (2.5%), amounting to minus €1,666 billion at the end of the second quarter of 2016.
Households: strong capital market exposure with exceptionally robust external financing
In the second quarter of 2016, the transaction-related acquisition of financial assets by households in Germany amounted to just under €48 billion and was thus above the long-term average, continuing the upward trend of the previous three years. A fair amount of this was invested in bank deposits (including currency), €25 billion in net terms, almost exclusively flowing into transferable deposits (including currency). Meanwhile, savings deposits (including savings certificates) experienced a distinct decline. In light of the low-interest-rate environment of the last few years, households' preference for liquid deposits continued, albeit to a lesser extent. Claims on insurance corporations and pension funds, which, like bank deposits, are typically perceived as being low-risk, were built up strongly, adding over €18 billion. Compared with the last few years, however, this growth was below average. The risk aversion which has been evident alongside the preference for liquidity therefore continued to be observed in the second quarter of 2016, although it seemed to be slightly less pronounced by the end of the quarter. Overall, this development points to households' heightened yield awareness.
This is borne out by households' renewed strong exposure on the capital markets. In the quarter under review, the acquisition of investment fund shares was similarly high as in the previous quarter, with purchases principally of bond and real estate funds. Net purchases of shares and other equity, at €5 billion, were slightly lower than in the preceding quarters, but still remained at a comparatively high level. Although these funds also flowed into foreign corporations to a significant extent, the purchase of domestic listed shares remained dominant in the period under review. This indicates households' preference for domestic securities and therefore strengthens the impression of risk aversion, since such local investments are typically viewed as being safer. Debt securities, which have been sold in net terms for five consecutive years now, also experienced outflows in the second quarter of 2016; at €4 billion, these were significantly higher than in the preceding quarters. The context of low, and in some cases falling, yields should be remembered when considering this.
The strong pick-up in financial assets resulting from transactions was accompanied by slight valuation losses, which squeezed financial assets by €4 billion. In the negative German stock market environment, listed shares of domestic issuers were most affected by this. Conversely, listed shares issued by non-residents as well as investment fund shares, which typically have a diversified portfolio and also comprise foreign investment, experienced significant valuation gains. In the aggregate, transaction-related and valuation-related changes resulted in a significant pick-up of financial assets by €44 billion (0.8%), therefore bringing them to €5,401 billion by the end of the second quarter of 2016.
At €16 billion, households' external financing reached its highest value since 2000. The upward trend which has been ongoing since mid-2008 therefore continued unabated. Primarily, housing loans were taken out, but financing by consumer credit also reached a level last seen in 2010. The exclusive lenders of these loans were domestic corporations, especially banks. Overall, liabilities therefore rose by almost €16 billion (1%) to €1,645 billion. This, together with the marked increase in financial assets, was reflected in an increase of net financial assets by €28 billion (0.8%) to €3,756 billion. The debt ratio – defined as total liabilities as a percentage of annualised nominal gross domestic product – was practically unchanged at 53.2% at the end of the second quarter of 2016.
Non-financial corporations: reduction of financial assets accompanied by declining external financing
In the second quarter of 2016, following the marked increases of the preceding quarters, the transaction-related acquisition of financial assets by non-financial corporations entered negative territory for the first time since the start of 2015 at around €3 billion. In this context, lending made an especially negative contribution, slightly exceeding €5 billion. Debt securities were also run down by €3 billion in net terms. In both cases, it was mainly lending to domestic corporations which was reduced. Meanwhile, investment fund shares saw only a marginal decrease in net terms of just under €1 billion. Conversely, the lion's share was invested in bank deposits (including currency) and shares and other equity, both of which saw net inflows of around €5 billion. In the case of shares and other equity, funds were principally invested abroad. Moreover, just under €3 billion was invested in claims on insurance corporations and pension funds.
At just under €15 billion, external financing in the period under review was down on the previous quarter. Positive contributions came from funds raised through loans, at just over €7 billion. Non-residents in particular emerged as investors, alongside domestic monetary financial institutions. Financing via market-based instruments was also expanded, albeit to a lesser degree than in the preceding quarter. Financing by debt securities, for example, made a positive contribution in net terms (€5 billion). These funds were principally provided by non-residents. At the same time, shares and other equity were issued to the tune of just over €2 billion in net terms, with domestic corporations providing much of the funding.
The transaction-related increase in both financial assets and liabilities was offset by valuation changes, which left a mark on financial assets (minus €20 billion) but affected liabilities (minus €81 billion) in particular. Taking these substantial valuation changes into account, net financial assets increased overall by €43 billion, which meant that a figure of minus €1,666 billion was reached at the end of the second quarter of 2016. The debt ratio – defined as the sum of issued debt securities, loans and pension provisions as a percentage of annualised nominal gross domestic product – therefore stood at 61.5% at the end of the quarter. As annualised GDP growth outpaced the increase in debt, the debt ratio was slightly lower than in the previous quarter by 0.2 percentage point.
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.