Eurozone Private Lending Rises

        FRANKFURT—Lending to the eurozone's private sector rose at its fastest rate in more than three years in May, according to a report on Friday from the European Central Bank, suggesting the region's economic recovery is beginning to broaden out and boost demand for new credit.
        Private sector lending rose 0.5% on the year last month, the ECB said, up from April's flat reading on an annual basis. The rise was driven by a 0.9% increase in lending to households, particularly for home purchases, which offset a slight decline in business lending.
        After adjusting for sales and securitizations, which many economists use as a gauge of underlying strength in credit, lending to the private sector increased 1% annually, up from April's 0.8% rise.
        "Loans to the private sector are trending in the right direction, albeit gradually so far," Howard Archer, an economist at IHS Global Insight, wrote in a research note. "Overall, the evidence indicates that the ECB's Quantitative Easing program…its previous stimulus measures and improved eurozone economic activity have combined to improve the supply of bank loans."
        In March, the ECB launched a ˆ60 billion ($67.2 billion) a month bond buying program, mostly in government bonds. The program is intended to run at least through to September 2016. In addition, the ECB last year began making cheap four-year loans available to banks on the condition that they in turn raise lending to the private sector. So far, the ECB has extended more than ˆ380 billion in these loans to banks since the program started last September.
        Bank lending should continue to improve, said RBC Capital Markets economist Timo del Carpio. "We consider there is more to come from this cyclical upswing, not least as we judge that previous and current ECB interventions have yet to fully work their way through to the real economy," he wrote in a research note.
        Separately, the ECB's broad measure of money supply, M3, was up 5% on the year, a slight deceleration from April's 5.3% rate.
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        (END) Dow Jones Newswires

        June 26, 2015 05:50 ET (09:50 GMT)

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