Bank lending to customers drops 4.6%

LENDING by the banks plunged in April while there was also a drop in consumer deposits.

Bank lending to consumers fell 4.6% in April with mortgage lending alone down 2%.

It was lending for other purchases that really plunged, falling by 13.4% in the month, according to statistics released by the Central Bank. The figures also showed that lending to businesses fell 2.2% annually in April.

Director of the Professional Mortgage Brokers Association Rachel Doyle said the fact that the level of lending decline has abated slightly gives no real cause for optimism, since the levels are declining from already dramatically reduced levels of lending in the previous year.

“Houses are more affordable and people’s repayment capacity is much better. The real question is, is the restriction due to the banks’ lack of access to credit? If this is the case the government needs to act now. If Irish lenders cannot or will not lend this should make the Irish market an attractive proposition for a foreign lender,” she said.

Irish government-guaranteed lenders’ deposits increased €7.3 billion during April to €400bn, driven by a €12.8bn increase in general government deposits. However excluding government inflows, deposits at the banks fell €5.5bn during April.

Overall the rate of decline in deposits in Ireland’s banking system slowed to 9.1% year-on-year in April from a 10% reduction the previous month.

Experts said Irish consumers, companies and pension funds have been withdrawing cash from Irish-based banks most of whom are struggling to keep their heads above water in a two-year crisis.

Chief executive with Bloxham Stockbrokers Alan McQuaid said these latest figures are a slight improvement on recent months and the Government will be encouraged by the stabilisation of deposits.

“Still, we remain a long way from where we want or need to be to get the economy moving again.

“The reality is that until the banking sector crisis is fully resolved and things improve on the labour market front then the supply and demand for credit will remain subdued in our view, severely hampering the recovery prospects for the economy as a whole in the process.”

The amount which has been borrowed by financial institutions from the Central Bank as part of the euro system fell by €5bn to €106bn, with the domestic banks accounting for €77.8bn of this.