FRANKFURT: Banks took 97.8 billion euros ($104.50 billion) in cheap long-term loans from the European Central Bank on Thursday, far exceeding expectations and offering fresh evidence that a nascent euro zone recovery is spurring lending.
The ECB is offering banks the loans as part of a cocktail of measures aimed at pumping around 1 trillion euros into the euro zone economy, with a view to shifting inflation from below zero towards its target of just under 2 percent.
Banks took 82.6 billion euros and 129.8 billion euros of the four-year TLTRO loans in September and December respectively, just over half the total cash on offer last year.
A Reuters poll had pointed to banks taking 40 billion euros in the latest tranche, which the ECB made more attractive by removing a 10 basis point premium over its main interest rate of 0.05 percent that was applied to the first two TLTROs.
The ECB said there were 143 bidders for this week's TLTROs.
Thursday's bigger-than-expected loan take-up came after the ECB earlier this month painted an upbeat picture of the euro zone's growth outlook as it embarks on a plan of money printing to buy sovereign bonds, or quantitative easing.
The TLTRO money cannot be easily parked at the ECB and banks are supposed to lend it on, making it a test of their confidence in borrowers such as small and medium companies, the euro zone's economic backbone.
Pointing to improving data, the ECB on March 5 lifted its growth forecast to 1.5 percent for this year, from the 1.0 percent it predicted in December.
Its latest bank lending survey meanwhile pointed to increased loan demand.
Despite exceeding expectations, Thursday's TLTRO take-up leaves the ECB with much to do to achieve its goal of expanding its balance sheet by around 1 trillion euros. It has deployed the QE programme with the aim of meeting that target.
The euro zone's central bank has said it will buy 60 billion euros a month of mainly sovereign bonds until Sept. 2016 or until inflation is pushed backed towards target.
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