LENDING TO consumers and businesses in the Republic continued to decline last month, according to new figures from the Central Bank. The data also shows that deposits continued to flow from Irish banks in May, mostly because of household withdrawals.
The Central Bank said lending to households fell at an annual rate of 4.7 per cent in May, after falling by 4.6 per cent in April.
Mortgage lending fell 2.1 per cent in May compared to the same month a year earlier, while lending for other purposes was down 13.6 per cent.
Household lending fell by €449 million last month following a decline of €570 million in April. Last month’s decline was attributed to a €262 million fall in loans for house purchases.
Loans for consumption purposes fell by €156 million in May, compared to a €341 million decline the previous month.
Loans to the household sector for other purposes was down €31 million.
Lending to businesses was down 2.6 per cent in the 12 months to the end of May, following a 2.3 per cent decline in April.
Corporate lending declined by €87 million during May following a sharp decline of €708 million the previous month.
The Central Bank figures reveal an 8.7 per cent annual decline in private sector deposits in May, compared to a 9.1 per cent fall for the year 12 months to the end of April.
Last month there was a €752 million outflow of deposits due predominantly to household deposits, which fell by €709 million during May.
Household deposits with agreed maturity of up to two years increased by €217 million last month. Short-term savings deposits fell by €383 million over the same period.
The amount borrowed by financial institutions from the Central Bank as part of Eurosystem monetary policy operations fell by €3.8 billion to €102.3 billion last month, the figures show.
It emerged last month that Irish banks have been receiving a temporary boost from the National Treasury Management Agency (NTMA), which has placed €19 billion of bailout funds on deposit with them.
The deposits began to be lodged with AIB, Bank of Ireland, Irish Life Permanent and EBS in January, but will be withdrawn again at some stage before the end of this month. At this point the funds will return to the banks as capital under a planned €24 billion recapitalisation.
Bloxham chief economist Alan McQuaid said the latest Central Bank figures were “disappointing”.
“The bottom line is that we are still a long way from where we want/need to be to get the 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 remain subdued in our view, severely hampering the recovery prospects for the economy as a whole in the process.”
