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Credit to households falls again in June

Thursday, July 31 11:59:35

Loans to Irish households declined at a rate of 3.9pc year-on-year in June, as against an annual decline of 3.7pc in the two previous months, and still remaining very weak overall, latest figures show.

Lending for house purchase, which accounts for 80pc of total household loans, declined at an annual rate of 3.1pc in June. Lending for consumption and other purposes fell by 6.7pc over the same period.

Household loan repayments exceeded draw-downs by E104m during June, following a net monthly decrease of E490m in May. Developments last month were mainly driven by a E99m decline in loans for non-housing, non-consumption related purposes.

The outstanding stock of loans to the Irish private-sector declined by approximately E6bn during June. However, this was primarily due to technical factors arising from the reclassification of certain financial entities.

Meanwhile, the Irish resident private-sector deposits rose by E26m during June. On an annual basis, deposits from the Irish resident private sector were down 3.2pc, following a year-on-year decrease of 3.4pc in the previous month. Non-resident private-sector deposits increased by E1.9bn in June, following a E763m fall in May. Developments in June were mainly driven by a E1.6bn increase in private-sector deposits from other Eurozone residents, most of which was deposited in IFSC banks.

Credit institutions' borrowings from the Irish central bank as part of the Eurosystem monetary policy operations fell by E6.8bn in June, leaving the outstanding stock of these borrowings at E23.2bn. The domestic market group of credit institutions accounted for E17bn of this total outstanding stock and current levels represent the lowest level of reliance on central bank funding since June 2008.

Alan McQuaid of Merrion Stockbrokers said that the credit data continue to remain the most disappointing as regards Ireland's recovery story.

"While there has been some improvement in recent months in terms of bank lending, progress continues to be slow. Advancing credit to the SME sector in particular is essential if the economy and labour market is to fully recover. But even lending to households leaves a lot to be desired, still down close on 4.0pc on an annual basis. The financial institutions maintain that this is a demand rather than supply issue and are open for business. If that is indeed the case then one would expect an improvement in the credit figures in the coming months as the economic data in general get better, but seeing is believing," he said.

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