Reliance on ECB loans falls €1bn

Irish banks reduced their dependance on ECB loans by over €1.1bn in December, according to the monthly credit statistics from the Central Bank.

December saw a further decline in household lending levels, although a slight annualised improvement was evident when compared with the previous month.

The credit statistics, published yesterday by the Central Bank, show bank lending to householders fell by 3.8% in December 2011 compared to a year earlier.

This followed a 4.1% annual decline in November. As with that month’s figures, December’s lending trend was driven by activity in the mortgage lending sphere.

December 2011 saw a 2.5% year-on-year fall in mortgage lending while lending for consumption and other purposes fell by 8%. However, when meas-ured on a monthly basis, mortgage lending increased by €37m compared to November.

Lending to companies fell 1.6% compared to the previous year. December’s annualised decline was therefore slightly higher than the 1.5% drop seen in November.

There was better news on the deposits front, with a rise of €108m in Irish resident private-sector deposits compared to November, even though they were still down over 7% on a year-on-year basis.

Stephen Kinsella, economics lecturer at University of Limerick, said the deposit figures “show no evidence of money flowing into the Irish banks”.

However, Dermot O’Leary, chief economist of Goodbody Stockbrokers, said December’s deposit trends were “more comforting”, slowing the pace of annual decline in deposits from 9% in November to 7.3% in December.

Mr O’Leary also noted a “surprising reduction” in the use of ECB liquidity facilities by Irish banks (down €1.1bn to €72bn) in December 2010.

Alan McQuaid, chief economist, Bloxham Stockbrokers, said: “Although there are some elements of these latest banking figures which may please the Government, particularly on the household deposits side, the underlying message from the data is still one of overall weakness and difficulties in the banking sector.

“The bottom line is that we are still a long way from where we want — and need — to be as regards credit demand and availability to get the domestic economy moving again.”