€690m drop in bank lending

Financial institutions lent €690m less to Irish consumers in January than in December, according to new figures from the Central Bank.

Thu, 01 Mar, 2012 - 00:00

Geoff Percival

The reason for the large decrease in lending — December’s monthly decline amounted to €65m in comparison — was a €394m decline in loans for consumption purposes and respective falls of €216m and €80m in mortgage lending and loans for other purposes.

On a year-on-year basis, total household lending levels fell by 3.9% in January; largely unchanged from the annualised falls in the preceding months; December seeing a 3.8% year-on-year fall and November seeing a 4.1% decline. But January’s annualised fall included a 2.4% fall in mortgage lending, slightly improved on December’s decline. Lending for consumption and other purposes was down by 8.2%, again on a year-on-year basis.

January also saw an accelerated decline in business lending — with loans to the non-financial corporate sector down by 2.2% year-on-year, compared to an annualised fall of 1.6% evident in December. In all, the past 12 months have seen a combined €4.97bn fall in household lending from institutions.

Separate figures, published yesterday by the Department of Finance, showed another rise in deposits held by the four covered Irish banks; rising in January by €200m to just over €147bn.

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

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

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