Cash holdings fall again as loss for year hits 40%

BANK DEPOSITS:THE AMOUNT of cash on deposit in banks based in Ireland fell in July for the 11th consecutive month, according to figures published by the Central Bank of Ireland yesterday.

The decline, of €14.4 billion compared to June, brought total deposits to €577 billion. The July decline was of a similar magnitude to the previous five months, but much lower than the September 2010-January 2011 period when massive declines took place as foreigners slashed their cash holdings in Ireland. The Irish banking system has lost more than 40 per cent of its deposit base since August last year, when total deposits stood at €983 billion.

Yesterday’s figures show that foreigners’ deposits have stabilised in recent months, with July marking the first significant increase since August last year.

The increase came despite heightened fears about peripheral euro-area creditworthiness in July. Irish Government bond yields reached record euro era levels in mid-July. By contrast, Irish residents’ deposits in Ireland-based banks continued to fall in July, with their net €19 billion withdrawals far exceeding the net €4 billion increase in foreigners’ deposits.

Almost all of the €19 billion decline was accounted for by the Government drawing down funds deposited with the banks. This is likely to reflect the earlier receipt of EU-IMF bailout funds, which had been on deposit, but which were drawn down in July. Irish private sector residents had deposits of €167 billion in July (of the €577 billion total). This represented a decline of less than €1 billion on June. Irish private sector aggregate deposits have shown no clear trends upwards or downwards since the end of last year.

All four subcomponents of Irish private sector deposits recorded broad stability in July. These components are: households, companies, banks, and insurers and pension funds. Yesterday’s Central Bank figures also included the aggregate amounts banks have lent out to their customers. Total outstanding loans to businesses rose €342 million month on month in July, to reach €89.3 billion. This was the third consecutive monthly rise, but the amount is almost half that at the peak of the boom. Much of the very large decline is accounted for by property loans being moved to Nama.

Lending to households for mortgage purposes continued to fall in July. Total mortgage lending stood at just over €98 billion, down €315 million on July. At the peak in April 2008, mortgage holders owed banks just over €127 billion.