Lending levels still in decline

The level of decline in household lending levels was broadly unchanged in May, down by 3.9% on a year-on-year basis against a 4% annualised fall in April.

Latest Central Bank data shows, however, no change in annualised mortgage lending levels — with loan volumes, in this regard, down by 2.5% year-on-year.

In monetary terms, bank lending to households declined by €264m during May.

Developments, according to the Central Bank, “were largely driven by a decrease in loans for house purchase of €242m.

Loans for other purposes also decreased, by €44m, while loans for consumption increased by €21m”.

Commenting on the latest figures, Merrion Stockbrokers’ economist, Alan McQuaid said that the outlook is for a continuing stagnation in both demand and availability of credit.

“Although there is some sign of improvement in the deposits side, the underlying message from the latest Central Bank data is still one of overall weakness and difficulties in the banking sector,” Mr McQuaid said, yesterday.

“The bottom line is that Ireland remains a long way from where it wants and needs to be as regards credit demand/availability 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, the supply/demand for credit will stay subdued,” he added.

The latest Central Bank stats also show that lending to the corporate sector — excluding financial companies — was down by 2.1%, year-on-year, in May.

This followed on from a similar 1.8% annualised fall in April.

As referred to by Mr McQuaid, there was a slight improvement on the deposit side, with household deposits 3% down, year-on-year, during the month; compared to an annualised fall of 3.4% measured in April.

The Construction Industry Federation (CIF) used yesterday’s figures to call on Government to ensure that the banks are providing access to mortgages.