November 08, 2014

Is Commerzbank earning more on small and medium sized companies because of more lending or higher interests?

Sir, I refer to Alice Ross’ “Commerzbank buoyed by rise in core lending” November 7.

I was pleasantly surprised when reading of “a rise in operating profits… in the core bank, which includes lending to private customers and Germany’s small and medium-sized companies, the Mittelstand.”

But, since I do not understand how banks can lend to that type of clients, as that requires them to hold more equity, perhaps that does not signify more lending but rather that these borrowers are more desperate for credit, and therefore accept paying interest rates which are higher than their riskiness merits.

It would be great if Ross takes this opportunity to deepen an analysis of what really is happening with the access to credit of these "risky" bank clients.