Euro zone lending stable in August, M3 beats expectations

FRANKFURT (Reuters) - Lending growth to euro zone companies and households held steady last month while a broader measure of money circulating, often an indicator of future activity, rose past expectations, data from the European Central Bank showed on Tuesday.

Lending to companies grew by 1.9 percent year-on-year in August while household lending grew by 1.8 percent, both unchanged from July's reading.

The annual growth rate of the M3 measure of money circulating in the euro zone, which has in the past predicted economic activity, rose to 5.1 percent from an upwardly revised 4.9 percent in July, beating expectations for a 4.9 percent reading.

Hoping to revive borrowing, spending and investment, the ECB has offered stimulus for years, cutting rates deep into negative territory, providing ultra cheap loans to banks and buying bonds worth over a trillion euros.

In a hopeful sign for credit growth, banks took up twice as much in free ECB loans last week than expected, suggesting that credit demand, supported by record-low interest rates, is expected to increase.

Growth in M3, which includes items such as deposits with longer maturities, holdings in money market funds and some debt securities, peaked at 5.4 percent in April 2015 and has hovered around 5 percent since.

The ECB cut interest rates and expanded its asset-purchase programme in March to spur lending and inflation but has kept a steady course since, despite low inflation readings.

(Reporting by Balazs Koranyi; Editing by Francesco Canepa)