Bank credit to SMEs continues to decline, Central Bank figures reveal

Bank credit to small- and medium-sized enterprises (SMEs) has declined for the 23rd consecutive quarter, according to new Central Bank statistics.

Property-related lending to SMEs represents 41 per cent of Irish banks’ outstanding loan book, the regulator reported on Tuesday.

In the second quarter SME credit lines fell by 0.8 per cent to €27.5 billion, an annual decrease of 7.5 per cent.

Outstanding SME credit includes €11.4 billion relating to real estate and construction business and €15.9 billion for non-financial, non-property, or “core” enterprises.

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The Central Bank defines SMEs along European standards as firms with fewer than 250 employees whose annual turnover does not exceed €50 million.

Property-related loans declined by €223 million in the quarter, as repayments continue to outstrip new drawdowns. This is the 23rd consecutive quarterly decline, the last increase occurring in the third quarter of 2011.

Gross new lending to property related SMEs reached €1.3 billion over the past twelve months, €179 million higher than the previous year.

Overall, the regulator said gross new SME loans stood at €1.2 billion in the second quarter of 2017, with repayments continuing to exceed new loan drawdowns, resulting in outstanding credit declining by 7.5 per cent over the year.

New lending

Gross new lending to core SMEs was €966 million during the quarter, marking an increase on the previous quarter of €64 million.

New drawdowns totalled €3.6 billion over the past twelve months, a 28.6 per cent year-on-year increase.

Primary industries and wholesale/retail trade and repairs accounted for almost half of all new drawdowns in the quarter.

The weighted average interest rate on new non-financial SME drawdowns was 4.05 per cent in the quarter, a fall of 5 basis points over the year.

Of note were interest rate declines to SMEs engaged in primary industries and manufacturing. Construction SMEs experienced an average weighted increase of 19 basis points over the same period and continued to attract one of the highest interest rates on new drawdowns.

In quarterly terms, higher than average rates were charged on new drawdowns by those in the wholesale or retail area and in agriculture. These sectors typically secure large shares of new lending.