Loan growth strategies of Czech Banks in the context of the real macroeconomic development

Abstract

The dynamics of the volume of loans provided within the framework of the Czech Republic as well as the Eurepean Union has had a significant growth trend over the last decade. The growing volume of loans being provided, associated with the ambitious plans of banks, is increasing the intensity of competitive pressure on the bank sector market. The topic of this contribution is the potential risky aspects of banks 'growth strategies when providing loans in the Czech Republic's real economic environment. The starting point of this contribution is a basic analysis of evolutions in the Czech bank sector over the past 10 years relating to loan portfolio development and structure and the capital adequacy of banks in the context of the overall macro-economic developments - GDP, average wages, etc. For research into the given problems, topical empirical methods of observation were selected based on the systematic collection of historical data, primarily from the available public sources - the Czech National Bank, the European Central Bank and the annual reports of banks operating in the Czech Republic. These data reveal that the actual situation of the Czech banking industry does not demonstrate, according to the basic parameters tracked by the CNB and ECB, negative or high risk aspects. Potential risk, on the long-term horizon, can be perceived and identified predominantly in the following areas. Firstly, the dynamic growth in volumes of loans provided to entrepreneurial and domestic household clients as well as the municipalities and local administrations is greater than the realistic macro-economic growth. Secondly, the risk can also be seen in the growing indebtedness of Czech households compared to the owned assets.