The energy dependency of bank loans is currently a highly relevant issue, not only because of climate protection policy, but also for security of supply. A number of banks are threatening to withdraw from loan commitments in the course of the transformation unless they are climate-neutral. For this reason, an analysis of the energy dependency of bank loans is relevant. An IW study shows which bank groups are exposed to risks.
The energy dependency of bank loans is related to the energy requirements of the individual sectors to which banks have granted loans. For example, the majority of energy requirements fall to a few sectors, in particular the chemical industry and energy and water supply, which together account for around two thirds of total commercial energy consumption. Sectors such as the wood and paper industry and the metal-producing industry also have high energy consumption compared to other sectors.
The energy intensity of an industry is defined as the total energy consumption of an individual industry in relation to its gross value added. It is a measure of how much energy is required for production in the respective industry. However, this only applies to the end products manufactured by the industry, as an industry with a low energy intensity for the production of its products may well use energy-intensively manufactured preliminary products. For example, the manufacture of machinery is not particularly energy-intensive compared to the manufacture of its intermediate products. The metal-producing industry is known to be energy-intensive, as very high temperatures are required for melting processes in steel production, for example. Higher energy prices would therefore initially affect metal production companies more than mechanical engineering companies. However, the higher energy prices would have a second-round effect on these companies. This also affects companies in other sectors that require energy-intensive primary products, for example from the chemical industry, for their production.
The IW analysis defines the measure of the energy credit burden. This key figure links the energy intensity of a sector with the credit volume that a bank or banking group has granted to this sector. The energy credit burden therefore describes how much energy consumption is behind the credit volume financed by a bank or banking group. If this figure is now set in relation to the total size of the credit volume of a bank or banking group, the relative energy credit load is a key figure that enables a comparison between different credit institutions. In the event of an energy crisis, a bank with a higher energy loan burden thus bears a higher credit default risk in its portfolio compared to a bank with a lower energy loan burden. Depending on the energy source, it is possible to calculate the respective gas loan burden, oil loan burden or hard coal loan burden for banks or bank groups. If a bank has a higher gas loan exposure compared to another bank, it has granted a higher loan volume to energy-intensive companies that cover a large part of their energy requirements with gas. Banks can also have different gas loan burdens, even though the financed companies have the same high energy intensity, but some companies use more gas as an energy source, while other companies use more renewable energies. Ultimately, the risk also depends on other factors such as substitution and pass-on possibilities. The analysis can also be used to examine the extent to which the bank groups consisting of the public savings banks and Landesbanks, the credit cooperatives, the private credit banks, the banks with special tasks and the branches of foreign banks lend particularly heavily to individual, particularly energy-dependent or less energy-dependent sectors. The results in detail:
- Chemical industry: Savings banks and credit cooperatives tend to be underrepresented in the financing of chemical companies. In contrast, private credit banks bear the largest share of the absolute energy loan burden. However, if the total volume of the respective bank group is taken into account, the picture changes. Relative to their own size, the branches of foreign banks are most heavily involved in financing the chemical industry and therefore also bear the highest relative energy loan burden. This is because the major banks provide 22.3% and the branches of foreign banks 14.2% of the credit volume to companies in the chemical industry.
- Energy and water supply: Similar to the chemical industry, a considerable proportion of the credit volume in the energy and water supply sector is concentrated in certain bank groups. Regional and state banks as well as banks with special tasks (e.g. development banks) play a prominent role in the credit financing of this sector. These three groups account for more than three times the average energy loan burden across all bank groups. The Landesbanken, for example, account for 18.5 percent of the credit volume to these companies.
- Metal production and processing: In contrast, a more homogeneous picture emerges in the metal production and processing sector. In absolute terms, credit banks and institutions from the savings bank network are more involved in financing this sector. In relative terms, however, the energy loan burden is distributed more evenly across the various bank groups, with a slightly disproportionate representation of the major banks.
One advantage of the definition used for the energy loan burden is that it makes it possible to aggregate energy intensities and loan volumes across sectors and make them comparable. Landesbanken and banks with special tasks (in particular KfW) have the highest relative energy loan burden. In comparison with banks from the savings bank group, for example, this is around twice as high. This means that Landesbanks have granted loans to companies that have twice as high a demand for energy sources in their production as companies financed by savings banks. Regional banks, Landesbanks and banks with special tasks have slightly higher figures for natural gas loans in particular. In contrast, the branches of foreign banks have higher values for oil loans. In the case of the regional banks and banks with special tasks, the high energy loan burden is primarily due to the strong involvement of this group of banks in energy supply.
Impact on NRW
The IW analysis shows that the banks' loan portfolios are subject to high pressure to adjust due to their energy dependency in the course of the transition to climate neutrality. However, this pressure is unlikely to lead to a further banking crisis in the coming years, as the banking sector in NRW and in Germany as a whole is well positioned, as the following points underline:
- Although large banks have a lower average return on equity and low equity ratios compared to the other bank groups, they only have fairly moderate values for energy loan burdens for imported energy sources such as natural gas, oil and hard coal.
- The gas loan burden is mainly focused on regional banks, state banks and development banks. Although regional banks tend to be larger than savings banks and credit cooperatives, they are still small compared to state banks and development banks. There is therefore no too-big-to-fail problem. The equity ratios are also high enough that they can certainly cope with unexpected losses.
- The oil loan burden is mainly focused on branches of foreign banks, while the coal loan burden is moderate for all bank groups. The sectors with a high energy intensity, but above all a high dependency on gas and oil, have significantly higher equity ratios compared to the less energy-intensive sectors, which also has a stabilizing effect on the creditworthiness of the banks' loans.
NRW has no major bank and no Landesbank. Energy risks in the loan portfolios of NRW banks are distributed among savings banks, credit cooperatives, NRW.BANK and foreign banks. We can see that the banks' loan portfolios contain energy-intensive sectors. However, most banks are well diversified, meaning that the transformation is unlikely to have a negative impact on the banking sector.
