LENDING TO businesses continued to decline in March and at a faster pace than in previous months, according to data from the Central Bank.
Credit to non-financial corporations fell 4.6 per cent on an annual basis in the year to March 2010, according to the statistics. This compares to annual declines of 3 per cent in January and 3.6 per cent in February 2010.
The figures for March – which take account of the first transfers to Nama (National Asset Management Agency) which took place during the month – show that the amount of credit outstanding to businesses, excluding banks, on the balance sheets of Irish financial institutions stood at €139.5 billion at the end of March. This compares to €141.3 billion at the end of February.
According to the Central Bank, the decline was due to the fact that repayments were greater than draw-downs. The remainder of the decline in outstanding amounts was due to the transfer of loans to Nama, write-downs and other “technical factors”, the bank said.
Lending to households – which includes residential mortgages and credit card debt – also continued to decline last month. Residential mortgages declined by €717 million during the month – a fall of 1.4 per cent on the year – to stand at €146.5 billion at the end of March.
In terms of consumer credit, repayments on personal credit cards were approximately €71 million higher than new spending on credit cards during the month.
Chief economist at Bloxham, Alan McQuaid, said the figures show that demand for private-sector credit remains “very weak”, a situation that is unlikely to change until economic conditions, and in particular the labour market, being to improve. However, he said that credit conditions should improve in line with economic recovery.
“We think the worst is now over as regards the Irish economic downturn, and the risks to GDP growth are to the upside rather than the downside, so assuming banks ease their lending restrictions in the coming months, then demand for credit should start to rise again.”
The country’s largest group of independent brokers expressed concern at the continuing decline in credit “at a time when there is evidence of demand from first-time buyers in particular”.
The Professional Insurance Brokers Association argued that the Government is “not ambitious enough” in terms of encouraging banks to lend to SMEs and first-time buyers.
