Acquisition of financial assets and external financing in Germany in the third quarter of 2020

At €94 billion, non-financial corporations’ external financing was considerably higher than in the previous four quarters. This was mainly attributable to the development of shares and other equity as well as of other liabilities. At €115 billion, financial asset acquisition was significantly positive – due to an increase in equity interests, including shares and other equity, amongst other reasons – while net financial asset acquisition stood at €20 billion.

Households’ financial assets reach new record high
In the third quarter of 2020, households’ financial assets grew by €108 billion, reaching a new record high of €6,738 billion at the end of September. The developments in the reporting quarter were once again characterised by a high level of saving and the ongoing recovery in the capital market, but no longer showed the same exceptionally strong momentum as in the preceding quarter. Households’ cash and deposits saw robust transaction-related growth totalling €41 billion; compared with previous years, however, this was not unusually high. For the fifth time in a row, claims stemming from savings deposits and savings bonds declined slightly. Households increased their claims on insurance corporations by €19 billion.

At the same time, households’ exposure on the capital market recently experienced a sharp upturn. In the third quarter, households acquired shares and investment fund shares worth €20 billion in net terms, which corresponds to almost three times the average quarterly purchases over the past ten years. In this context, households invested around equal amounts in both shares and investment fund shares. With net purchases totalling €7 billion, listed shares from foreign issuers were more popular than ever. By contrast, debt securities followed the trend of previous years and continued to be sold off. In the reporting quarter, households also benefited from valuation gains amounting to €20 billion.

External financing for households in Germany has followed a persistent downward trend for a number of years now and stood at €28 billion in the quarter under review. This was its highest value since the end of the 1990s. For the most part, it consisted of housing loans granted by domestic credit institutions. Liabilities thus totalled €1,936 billion at the end of the third quarter of 2020. As the four-quarter moving sum of nominal gross domestic product decreased during the reporting quarter, the debt ratio – defined as total liabilities in relation to nominal gross domestic product (four-quarter moving sum) – grew relatively sharply by 1.3 percentage points to 57.8%. Net financial assets grew by €80 billion to €4,802 billion at the end of the quarter under review.

Debt ratio of non-financial corporations significantly higher in the third quarter
At €94 billion, net external financing of non-financial corporations was well above the average of the previous four quarters. This increase is primarily due to exceptional growth in two components: at €37 billion, issuance of shares and other equity reached heights last seen 20 years ago, while expansion in other liabilities, mainly comprising trade credits, climbed to an all-time high of €42 billion. By contrast, both issuance of debt securities and the increase in credit financing were down on the second quarter of 2020, at €10 billion and €7 billion respectively. The weak figures for credit financing were primarily driven by a reduction in credit liabilities to domestic monetary financial institutions amounting to €11 billion.

At €115 billion, non-financial corporations’ acquisition of financial assets returned to strongly positive territory in the third quarter of 2020, following the dip in the second quarter. Expansion of cash and deposits remained significant, at €43 billion. While shares and other equity were still recording net sales in the preceding quarter, the quarter under review saw a return to purchases of this form of investment to the tune of €18 billion. Holdings exhibited somewhat less dynamic development overall. Financial assets reached €4,915 billion and thus recorded growth of 3.4%, exceeding the trend of the previous quarters. The increases in cash and deposits as well as other receivables were driving factors here. Valuation changes in shares and other equity were no longer as strong as in the first half of the year, making barely any contribution to the development of financial assets.

Taking into account all transactions and valuation effects, non-financial corporations’ net financial assets dropped again to -€1,952 billion. This decline was less significant than that seen in the previous quarter, however. The debt ratio – calculated as the sum of loans, debt securities and pension provisions as a percentage of nominal gross domestic product (four-quarter moving sum) – remained on its upward trajectory, climbing by 1.2 percentage points to 72.3%. The increase was once again due to both the continued rise in absolute debt and the subdued state of aggregate economic activity.