Loans to businesses begin to rise

HOUSEHOLD lending levels deteriorated further in June, but loans to businesses actually increased when compared to May.

At the same time the rate of deposit withdrawals from Irish banks accelerated.

Latest Central Bank data showed that the level of loans issued to individual households fell by 3.9% — or €196 million — in June, on a year-on-year basis.

This followed an annualised fall of 4.8%, or €449m, in May. The May figure included a year-on-year fall of 2.1% in mortgage lending while the June figures were driven by a 2.2% annualised decline in mortgage lending.

Lending for general consumption purposes, meanwhile, declined by 9.2% last month, when compared to the same month last year.

Yesterday’s monthly credit stats coincided with the Central Bank altering its full-year 2011 forecast for the Irish economy downwards yet again — this time to marginal growth of 0.8%.

The credit figures also showed that lending to business — or the ‘non-financial corporate sector’ (NFC) — rose by €343m in June, on a rolling month-by-month basis. This was the first monthly increase since June of last year and followed a monthly decline of €87m in May. However, when measured on a year-on-year basis, corporate lending levels slipped by 3% in June, slightly up on the annualised 2.6% drop evident in May.

The Central Bank also updated on deposit outflows from the Irish banks, something which has been ongoing — at various levels — over the past year as uncertainty has mounted over the future of the banking landscape. Earlier this week AIB said it has recently seen a significant improvement in the rate of deposit outflows, including a slight rise in deposits this month.

On a combined Irish banking basis, however, the Central Bank reported yesterday that deposits fell by 10%, year-on-year, in June. This was the highest annualised increase in deposit outflows for three months and followed on from an 8.7% increase in May. Meanwhile, deposits held by businesses fell by 13%, on a year-on-year basis, in June.

The Central Bank also said that domestic Irish banks had loans of €72bn from the European Central Bank at the end of June, a fall of €2.4bn on the previous month.