Financial accounts statistics – commentary

for 1Q 2019

The overall situation

The total value of the financial assets in the Czech economy rose by 3.0% in Q1, signalling a substantial pick-up in growth. The year-on-year growth was also well above the previous quarter’s level (5.3%). Overall, the financial growth was due mainly to transactions, which amounted to CZK 732.9 billion. Non-transaction changes in the form of revaluations and other changes in the volume of assets fostered an increase in the value of financial assets of a further CZK 363.8 billion. All economic sectors except non-financial corporations contributed to various extents to the growth in financial assets. The dominant sector was financial corporations, the growth of which was due to changes in the balance sheet of commercial banks. The household sector recorded the second-largest, albeit much lower, growth. General government and the rest of the world followed some way behind. Compared with the extraordinary decline seen in the previous quarter, the latest drop in the financial assets of non-financial corporations was marginal. The financial developments in terms of liabilities were similar, with all economic sectors recording a quarter-on-quarter increase in value. Financial institutions dominated again, with commercial banks accounting for more than three-quarters of their overall increase. They were followed by the rest of the world and non-financial corporations and, some way behind, by general government. The increase in the household sector’s liabilities was the lowest in three years.

The shares of the individual financial instruments in total financial assets and liabilities were little changed, recording quarter-on-quarter fluctuations of up to 0.4 pp. Relatively large quarter-on-quarter increases in shares and other equity and deposits (of 4.2% and 3.9% respectively) caused their shares to rise at the expense of other accounts receivable/payable and loans. Transfers between transferable and other deposits are worth mentioning, although they did not diverge in size from the previously observed quarter-on-quarter changes. The balance sheet also remained virtually unchanged in terms of sector structure. The share of financial institutions increased on both sides of the balance sheet (by 0.9 pp and 0.5 pp respectively) at the expense of non-financial corporations and, in the case of financial assets, non-residents as well.

Chart 1 Breakdown of financial instruments in the economy
(in %)

Chart 1 Breakdown of financial instruments in the economy

Chart 2 Breakdown of financial assets and liabilities by sector
(in CZK billions)

Chart 2 Breakdown of financial assets and liabilities by sector

The household sector’s net creditor position strengthened again, the growth in net financial assets being the highest in eleven quarters in volume terms. The financial position of financial institutions improved. The latest decline in negative net financial assets was markedly higher than in the previous quarter. The financial position of general government also improved. By contrast, the negative net financial assets of non-financial corporations grew again. Their quarter-on-quarter growth was one of the highest from the long-term perspective. The rest of the world also recorded a drop in net financial assets.

Non-financial corporations

The value of financial assets was virtually unchanged at the previous quarter’s level (-0.1%). It was pushed down mainly by a decline in the value of loans and, to a smaller extent, also of financial derivatives. A transaction decrease in transferable deposits was only partly offset by growth in other deposits. By contrast, the value of unlisted shares and, to a smaller extent, also of other equity and other accounts receivable, increased due mainly to revaluation. After a slight decline in the previous quarter, the value of liabilities grew significantly (by 1.6%), due mainly to non-transaction growth in the value of unlisted shares and other equity (83% of the total growth in total liabilities). Short-term loans also increased significantly. The changes in the value of other financial instruments were insignificant. The increase in the negative value of net financial assets was due mainly to revaluation.

The share of debt liabilities (debt securities and loans) is fluctuating around 25% in the medium term. The share of trade payables and the sector composition of holders also remain stable.

Chart 3 Breakdown of financial assets and liabilities of non-financial corporations
(in CZK billions)

Chart 3 Breakdown of financial assets and liabilities of non-financial corporations

Financial corporations

The value of financial assets grew significantly quarter on quarter (by 5.4%). This was largely due to growth in other deposits (amid a drop in transferable deposits). All major financial instruments except currency and short-term debt securities increased rapidly. Liabilities also recorded an above-average increase (of 4.2%), due mainly to growth in other deposits. The value of short-term debt securities and unlisted shares increased further. The growth in liabilities was slightly offset by a drop in transferable deposits and, to a smaller extent, also in loans. The value of negative net financial assets declined due solely to transactions. 

The improvement in the financial position of the central bank sub-sector was a result of a rise in the value of listed shares on the financial assets side. The growth in other deposits on both sides of the financial balance sheet in the sub-sector of deposit-taking corporations except the central bank led to an increase in such corporations’ total assets amid a practically insignificant change in their financial position. The moderate improvement in the financial position of the sub-sectors of other financial intermediaries and captive financial corporations was a result of loan growth under financial assets. Growth in liabilities coupled with a weaker rise in financial assets led to a worsening of the financial position of the non MMF investment funds sub-sector. The financial positions of insurance corporations and pension funds were virtually unchanged.

Chart 4 Shares of sub-sectors in financial assets and liabilities of the financial sector
(in %)

Chart 4 Shares of sub-sectors in financial assets and liabilities of the financial sector

Chart 5 Breakdown of financial assets in selected sub-sectors of the financial corporations sector
(in %)

Chart 5 Breakdown of financial assets in selected sub-sectors of the financial corporations sector

General government

The value of financial assets increased by an above-average 6.2%, while that of liabilities rose by 3.9%. The sector’s financial position improved due mainly to real transactions. All three sub-sectors contributed to this positive trend, with local government dominating. 

On the financial assets side, all financial instruments except loans grew in value. The growth was generally due to transactions, with only equity recording a significant revaluation effect. A rise in the value of deposits (of 21%), amid contrary movements of transferable and other deposits, had the largest effect. This is common in the first quarter. The latest growth was also due to higher tax revenue than in previous years. The drop in the value of loans provided was caused mainly by Treasury operations within the sector and was thus also reflected in a decline in loans on the liabilities side. The total value of liabilities was fundamentally affected by a rise in the value of long-term bonds issued and, to a smaller extent, also by an increase in other accounts payable.

Chart 6 Breakdown of financial assets and liabilities of general government
(in CZK billions)

Chart 6 Breakdown of financial assets and liabilities of general government

Households

The growth rate of financial assets rose in quarter-on-quarter terms to 2.7%. Coupled with a decrease in growth in liabilities (from 1.8% to 1.1%), this led to a substantial increase in net financial assets. They were favourably affected by revaluation of financial assets and, to a lesser extent, by positive net financial transactions.

The growth in financial assets was due mainly to an increase in the value of shares and other equity (of 3.8%). However, this was caused almost solely by non-transaction effects. Investment fund shares increased significantly in value. In addition to positive revaluation, an important role was played here by transactions, which were channelled mainly into domestic funds. The growth rate of deposits decreased compared with the previous quarter. The growth in reserves in pension schemes remains strong. The renewed growth in debt securities was due mainly to growth in government bonds held by households (Republic Bonds). The liabilities side has long been affected by loans, the growth of which is driven by loans provided by deposit-taking corporations except the central bank. The growth rate of loans provided by this sub-sector (1.0%) was the lowest since the start of 2016.

Chart 7 Breakdown of financial assets and liabilities of households
(in CZK billions)

Chart 7 Breakdown of financial assets and liabilities of households

Rest of the world

Much higher growth of volume in liabilities than financial assets (3.0% and 1.1% quarter on quarter respectively) was reflected in a worsening of the sector’s net financial position. The value of net financial assets (-8.9%) was negatively affected by the balance on financial transactions, which was only slightly offset by exchange rate and other price effects.

The financial assets side was affected mainly by an increase in debt securities (of 11.6%) connected with a significant rise in non-residents’ holdings of long-term government bonds and short-term bank bonds. Shares and other equity recorded a substantial increase in value. However, this was due almost solely to non-transaction changes. Within loans, there was an extraordinary rise in short-term loans provided to non-financial corporations. The overall rise in financial assets was dampened by a drop in the value of deposits (of 10.0%) due to a decline in other deposits received by the CNB from abroad. The decrease in other accounts receivable mainly reflected a drop in trade credits provided to non-financial corporations. The value of financial derivatives decreased further due to non-transaction changes. On the liabilities side, listed shares recorded the highest growth in value due to favourable price developments. An extraordinary rise was recorded by loans, due mainly to growth in loans provided by domestic non-financial corporations. The value of deposits increased further. Unlisted shares and debt securities also recorded growth in value, albeit lower in volume. The liabilities side was negatively affected by financial derivatives and other accounts payable.

The changes in the value of financial instruments were reflected in the structure of the balance sheet. The share of deposits in financial assets decreased (by 2.0 pp), mainly in favour of debt securities and shares. On the liabilities side, growth in shares and loans led to a decrease in the share of debt securities and other accounts payable.

Chart 8 Breakdown of financial assets and liabilities of the rest of the World
(in CZK billions)

Chart 8 Breakdown of financial assets and liabilities of the rest of the World