Acquisition of financial assets and external financing in Germany in the second quarter of 2018 Results of the financial accounts by sector
17.10.2018 | Deutsche Bundesbank
At the end of the second quarter of 2018, the financial assets of households in Germany stood at €5,997 billion. Compared with the first quarter of 2018, this represents an increase of €80 billion or 1.4%. Investors continued to favour liquid investments as well as forms of investment that are perceived to be low risk – with inflows of €43 billion, currency and deposits saw the largest gains, and claims on insurance corporations also recorded significant inflows amounting to €18 billion. By contrast, exposure to shares and investment fund shares was lower than in the previous quarters, although still significant. Alongside these transaction-related inflows, valuation gains were also recorded in the second quarter of 2018. As liabilities also grew by around €15 billion at the same time, net financial assets rose by a total of €66 billion.
External financing of non-financial corporations in Germany was very strong in the second quarter of 2018, amounting to just under €95 billion. At €48 billion, loans comprised a considerable portion of this. In the same period, securities-based financing was also robust in net terms. Net financial assets fell slightly to -€1,770 billion.
Households: acquisition of financial assets and valuation gains surpass strong external financing
In the second quarter of 2018, the transaction-related acquisition of financial assets by households in Germany was strong, totalling just over €55 billion, with currency and transferable deposits growing by €44 billion and claims on insurance corporations rising by €18 billion. This is indicative of a continuing preference for liquid investments and forms of investment that are perceived to be low risk. By contrast, receivables from savings deposits and certificates were reduced once again.
Compared with the years directly 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. In the second quarter of 2018, the inflows of €5 billion into investment fund shares were especially noteworthy, albeit lower than in the preceding quarters. The purchased investment fund shares comprised, amongst others, shares in mixed securities funds, bond funds, and real estate funds. In addition, domestic listed shares were also purchased in limited volumes. 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 to be low risk, the developments in capital market exposure suggest an increased awareness of yield over the past few years. Debt securities recorded net purchases for the first time in seven years, although inflows were modest at €0.5 billion.
Alongside transaction-related growth, households’ financial assets also saw valuation gains, which were linked to effects arising from the prices of listed shares and investment fund shares, amongst other factors. Altogether, this led to a rise in financial assets of just over €80 billion to €5,977 billion in the reporting quarter.
At €20 billion in the second quarter, external financing of households in Germany reached its highest level since the turn of the millennium. This continued an upward trend that has been ongoing since mid-2013. Borrowed funds consisted primarily of housing loans from domestic monetary financial institutions. Overall, liabilities rose by just under €15 billion or 0.8%, reaching €1,755 billion at the end of the second 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 quarter to 52.6%. In combination with the development of financial assets, this resulted in net financial assets growing by just under €66 billion to €4,222 billion at the end of the quarter under review.
Non-financial corporations: strong external financing allows debt ratio to rise
In the second quarter of 2018, the transaction-related acquisition of financial assets by non-financial corporations was, at €50 billion, slightly higher than in the previous quarter. Amounting to €39 billion, the very strong acquisition of unlisted shares and other equity was the largest contributor to this. Other accounts receivable, which include trade credits and advances, likewise grew to a notable extent. While claims from currency and deposits as well as debt securities only saw limited growth, loans recorded a considerable decline of €9 billion.
At €95 billion, external financing of non-financial corporations also reached its highest level since the turn of the millennium. This was mainly attributable to loan-based financing totalling €48 billion. These funds were provided by domestic monetary financial institutions as well as from abroad. At €12 billion, financing based on shares and other equity was robust as well, with these funds also originating from foreign capital donors, amongst others. Furthermore, just over €2 billion of debt securities were issued. At €28 billion, other accounts payable, including trade credits and advances, saw marked expansion.
Taking valuation effects into account, total net financial assets fell slightly by €42 billion in the second quarter, reaching -€1,770 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), rose considerably over the quarter under review to 63.7%, as debt saw stronger growth than 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.