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Lending to households remains weak

Friday, August 29 11:51:27

Loans to Irish households declined at a rate of 3.9pc year-on-year in July, the same as in June, and still remaining very weak overall, latest Central Bank figures show.

Lending for house purchase, which accounts for 80pc of total household loans, declined at an annual rate of 3.1pc in July. Lending for consumption and other purposes fell by 6.5pc over the same period.

Household loan repayments exceeded draw-downs by E437m during July, following a net monthly decrease of E104m in June. Developments last month were mainly driven by a E255m decline in loans for house purchase.

The outstanding stock of loans to the Irish private-sector declined by approximately E9bn during July. This decline primarily reflected changes in the reporting population.

Meanwhile, the Irish resident private-sector deposits rose by E153m during July. On an annual basis, deposits from the Irish resident private sector were down 3.1pc, following a year-on-year decrease of 3.2pc in the previous month. Non-resident private-sector deposits increased by E824m in July following a revised increase of E436m (E1.9bn) in June. Developments in July were mainly driven by an increase of E845m in private-sector deposits from non-Eurozone residents, the majority 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 E85m in July, leaving the outstanding stock of these borrowings at E23.2bn. The domestic market group of credit institutions accounted for E16.4bn of this total outstanding stock and current levels represent the lowest level of reliance on central bank funding since June 2008.

"As we've said on numerous occasions recently, the credit data continue to remain the most disappointing as regards Ireland's recovery story. While there has been some improvement in the past few 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," said Alan McQuaid of Merrion Economics.

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