Fall in lending ‘hinders recovery’

The rate of lending by Irish banks is continuing to decline and hinder the recovery of the Irish economy, according to Merrion economist Alan McQuaid.

Mr McQuaid was speaking following the publication of figures from the Central Bank, which showed that loans to households declined at a rate of 4.1% year-on-year in December, compared with an annual fall of 4.3% in November.

“The credit data remain the most disappointing as regards Ireland’s recovery story.

“Although there has been some improvement in recent months in terms of bank lending, progress remains slow. Advancing credit to the SME sector, in particular, is essential if the Irish economy is to fully recover,” said Mr McQuaid.

Despite the much-vaunted upswing in the property market and the announcement of new funds for mortgage lending, the rate of mortgage lending declined by 3%, according to the Central Bank figures for last year.

“Lending for house purchase continued to be the main category driving the change, declining at an annual rate of 3.0%. Lending for consumption and other purposes, which accounts for around 23% of total household lending, fell by 7.6% over the same period,” Mr McQuaid said.

The figures which were published for December revealed that loan payments exceeded draw- downs by €139m in December. The trend over the last quarter saw a decrease in the difference between loan repayments and draw downs. In October, €472m more was repaid than lent but in November that had fallen to €403m.

Personal loans for consumption had actually increased by €40m in December.

Mr McQuaid said that there had been an increase in deposits in Irish-based bank accounts.

“There was a monthly increase of €570m in Irish resident private-sector deposits during December. This was due to a rise in deposits from non-financial corporates of €1.4bn. Household deposits also increased, by €28m over the month. However, other financial intermediaries and insurance corporations and pension funds posted decreases of €682m and €195m respectively over the month,” he said.