Deposits rise but loans to households still falling

The monthly banking figures released by the Central Bank gave mixed signals about the health of the overall economy.

Deposits held by the four Irish banks covered by a government guarantee increased by 1% last month to around €149bn, the sharpest rise in six months. The Central Bank also revealed that over half of this money came from Ireland and wasn’t purely as a result of foreign operations of Irish banks.

However, at the same time, loans to households continued to decline during March, and were 3.9% lower on a year-to-year basis.

Bloxham analyst Alan McQuaid said that Ireland remains a long way from where it needs to be.

“Although these latest banking figures are encouraging to some degree, particularly in relation to the deposits side, the underlying message from the data is still one of overall weakness and difficulties in the sector. The bottom line is that Ireland remains a long way from where it wants or needs to be as regards credit demand or availability to get the domestic economy moving again,” he said.

The figures released by the Central Bank showed that loans to households continued to decline during March, and were 3.9% lower on a year-to-year basis, following a decrease of 4.0% at end-February.

Lending for house purchase was 2.4% lower on an annual basis, while lending for consumption and other purposes declined by 8.0% over the same period.

Despite the fall in lending, the Professional Insurance Brokers Association, (PIBA) reported that there had been an increase in demand for mortgages.

Almost 50% of brokers experienced an increase in demand for mortgages according to PIBA.

They said that the biggest barrier to credit was that the banks were unwilling to lend.

Chief operations officer with PIBA, Rachel Doyle, said there is now no doubt whatsoever that the bank lending issue “is like a steel wall blocking off access to the pathway back towards normality in the property market”.