SME lending slips further

Bank lending to SMEs fell by 8.9% on a year-on-year basis during the first three months of the year, marking the 22nd consecutive quarter of downward movement, new figures from the Central Bank have shown.

The mainstream banks lent €27.9bn to SMEs between the start of January and the end of March, which was down by 0.9% on the final quarter of 2016.

Property-related lending now represents just over 42% of Irish banks’ outstanding SME loan book. Property loans to SMEs fell by 11% year-on-year in the first quarter, with small and medium-sized firms repaying €2.9bn more than was drawn down in new loans.

While repayments of bank lending, by SMEs, remains “elevated”, levels seen during the first quarter were lower than in previous years, the Central Bank said.

In its macro financial review — which measures global and domestic risks to Irish economic growth — earlier this week, the Central Bank noted “subdued credit conditions” for Irish corporates.

“Credit growth to SMEs remains negative across most sectors as firms continue to deleverage,” said the bank. “A large decline in non-performing loan rates across all categories of SME/corporate loans has been evident in recent years, although more than 10% of loans are non-performing and substantial sectoral variation in non-performing loan rates arises.”

The latest quarterly trends show that lending to core SMEs fell by 7.4% over the past 12 months, as €1.3bn more was repaid than drawn down.

According to the Central Bank, the hotels and wholesale/retail trade sector — which repaid a combined €656m more than was drawn down — mainly drove developments over the year.

The regulator added that credit to core SMEs remains “consistently negative”, in contrast to large enterprises.

Four SME sectors actually registered increases in net lending during the first quarter, where drawdowns exceeded repayments.

Primary industries, business and administration, construction and manufacturing registered a combined positive net flow of €114m. Overall, SME credit declined by €280m in the first quarter, the smallest decline since the third quarter of 2013, the Central Bank said.


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