At the end of the first quarter of 2020, German households’ financial assets amounted to €6,337 billion. This was €128 billion (or 2.0%) lower than in the previous quarter. Although households built up assets worth €90 billion, they also suffered valuation losses of €218 billion. These were mainly due to price falls in the capital market triggered by the pandemic and uncertainty about its economic consequences. Liabilities rose by €14 billion in the first quarter of 2020 and thus by roughly as much as in the preceding quarter. Overall, net financial assets fell by €142 billion to €4,447 billion.

Non-financial corporations in Germany made greater use of external financing in the reporting quarter. Loans, which saw a transaction-related increase of €24 billion, were the driving force behind this. Non-financial corporations also issued €6 billion worth of debt securities and €7 billion worth of shares and other equity in net terms in the reporting quarter.

Households’ financial assets undergo significant valuation losses

Households suffered considerable valuation losses in the first quarter of 2020. This affected shares and other equity (-€101 billion) in particular, followed by investment fund shares (-€83 billion).

The transaction-related acquisition of financial assets by households hit a new record high in the reporting quarter, at around €90 billion net. Net purchases of shares and other equity (equity investments) were one chief reason for this. At €14 billion, they were very clearly up on the figure for the preceding quarter. In addition, inflows of currency and deposits amounted to €24 billion, accounting for a significant part of the acquisition of financial assets. Claims on insurance corporations increased by €23 billion and thus accounted for a significant share of financial asset acquisition. By contrast, households reduced their investment in savings bonds and savings deposits by €11 billion, and therefore to an even greater extent than in the previous quarter.

Households’ investment behaviour in the capital markets in the quarter under review was marked by a strong net inflow of €8 billion to domestic shares. Inflows were also observed for listed foreign shares and investment funds. By contrast, in the first quarter of 2020, households again reduced their holdings of debt securities on much the same scale as in the previous two quarters.

The increase in household debt, at €13 billion, was somewhat below the average of recent years. Loans from monetary financial institutions again played a major role in net borrowing in the quarter under review. As in the previous quarters, the majority of these were loans for house purchase.

By the end of the reporting quarter, German households’ total liabilities had risen by slightly under 1% to €1,890 billion. The household debt ratio, defined as total liabilities as a percentage of nominal GDP (four-quarter moving sum), thus saw a 0.4 percentage point increase on the quarter to 55%. This rise is partly due to higher household debt levels, as well as subdued economic activity as a result of the COVID-19 pandemic. Overall, the growth in financial assets and liabilities led to a €142 billion decrease in households’ net financial assets, bringing the figure to €4,447 billion.

Debt ratio of non-financial corporations rises significantly

Non-financial corporations’ acquisition of financial assets was relatively strong in the first quarter of 2020 at a total of €43 billion. This was attributable, in particular, to net purchases of shares and other equity amounting to €50 billion. Other receivables were pared back slightly (-€5 billion).

However, as in the case of households, these positive impulses from transactions were offset by significant valuation losses. Non-financial corporations’ investments in the form of shares, investment fund shares and other equity suffered losses of €265 billion in the reporting quarter. This resulted in a net decline of €234 billion in non-financial corporations’ financial assets, which represents the sharpest decline since 2002.

External financing was quite high in the reporting quarter at €30 billion. One reason for this was that non-financial corporations were increasingly borrowing funds in order to offset lost earnings and to prevent future liquidity bottlenecks. Credit financing amounting to €24 billion was the key factor in this development. Non-financial institutions borrowed €10 billion net from domestic banks and a further €17 billion from foreign lenders. Non-financial corporations also gathered up relatively large amounts in the capital market. They received inflows of roughly €6 billion through the issuance of debt securities, and just under € 7 billion through the issuance of shares and other equity. However, the increase in external financing was dampened by a €10 billion reduction in other liabilities, which include advances and trade credits.

As liabilities in the financial accounts are generally calculated at market values, movements in the stock markets also had a significant impact on the liabilities side of non-financial corporations, leading to a lower net value of issued shares and other equity. Taking all transactions and valuation effects into account, this actually led on balance to a marked increase of €280 billion in non-financial corporations’ net financial assets. At the end of the first quarter of 2020, their net financial assets therefore totalled -€1,680 billion. By contrast, the debt ratio of non-financial corporations, which is calculated on the basis of the sum of loans, debt securities and pension provisions in relation to nominal gross domestic product (four-quarter moving sum), rose by 1.1 percentage point to 68.9%. This means that the debt ratio was at its highest since 2004. As was also the case for households, this sudden sharp rise was in particular due to higher debt levels combined with declining economic activity.