New euro zone business loans plunge in April

FRANKFURT (Reuters) -New lending to euro zone companies plunged in April, indicating that banks are tightening access to credit even as the bloc starts to emerge from a year of lockdowns, data from the European Central Bank showed on Monday.

With a third wave of the pandemic receding in the region, economic activity started to pick up in April after a double dip recession but large chunks of the services sector remained shuttered and with depleted balance sheets.

The monthly flow of loans to euro zone companies was a negative 26.8 billion euros in April, reversing much of the 51.1 billion euro ($62.3 billion) rise a month earlier, dragging the annual growth rate of new loans to a 14-month low of 3.2% after last month's 5.3%.

The monthly drop is the second deepest on record, only exceeded by a 28.6 billion plunge in June 2009, at the height of the global financial crisis.

Banks, which provided copious emergency cash at the start of the recession, said they are likely to curb access to cash this quarter and the potential reduction of state support to firms could further limit their ability to lend.

The figure is likely to worry ECB policymakers when they meet next month as the nascent economic recovery relies heavily on both fiscal and monetary support.

Household lending growth accelerated to 3.8% from 3.3%.

The annual growth rate of the M3 measure of money supply, mostly a reflection of the ECB's bond purchases, slowed to 9.2% from 10.0% a month earlier, below market expectations for 9.5% growth.

($1 = 0.8201 euros)

(Reporting by Balazs KoranyiEditing by Francesco Canepa and Barbara Lewis)