Revival for private sector deposits

Irish private sector deposits turned positive in August for the first time since Jun 2010, according to figures released by the Central Bank yesterday.

There was a year-on-year increase of €1.6bn in deposits in August, which is a 0.7% increase over the past 12 months.

Household deposits accounted for €268m of this total, while insurance and pension funds made up a further €1.2bn. Private sector deposits from non-residents increased by €712m over the month of August.

However, there were further signs of weakness in bank lending. Loans to households fell by 3.7% on an annual basis over August. Mortgage lending was down 2.1% over the same period, while lending for consumption and other purposes fell by 8.3% on an annualised basis to August.

There was also a drop in lending to the corporate sector, which was down 3.2% over the past year.

“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,” said Merrion Stockbroker economist Alan McQuaid.

“The bottom line is that Ireland remains a long way from where it wants/needs to be as regards credit supply/demand 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 the supply/demand for credit will stay subdued in our view, severely hampering the overall recovery prospects for the economy as a whole in the process,” Mr McQuaid said.

The Minister for Finance Michael Noonan published the Credit Union Bill 2012 yesterday. The bill covers four areas: prudential regulation of the sector; governance procedures; what happens in the event of a restructuring; and stabilisation, which provides for the recapitalisation of credit unions that are viable but carrying insufficient capital.