Bank to raise amount it lends to SMEs by 20%

Bank of Ireland is expecting to raise the amount it lends to small- and medium-sized businesses (SMEs) by 20 per cent to €6.5 billion this year. The bank said yesterday that it wants to capitalise on the increasing importance of the SME sector to the economy.

Research conducted by Bank of Ireland with small business groups, the SFA and Isme, shows that there are currently 300,000 SMEs in the Republic. This represents an 80 per cent increase over the past decade.

These companies, which each have a turnover of no more than €50 million and have no more than 250 employees, employ 60 per cent of the Republic's workforce.

The bank's market research has also shown that 75 per cent of such firms are family-run, with half having sufficient cashflow to negate any need for borrowing.

Some 13 per cent have grown their turnover by 50 per cent over the past two years, with 60 per cent expected to change hands over the next five years.

Bank of Ireland claims to be either the market leader or the second player in all areas of banking for SMEs. The market as a whole is thought to be worth more than €1 billion each year.

Cathal Muckian, director of Bank of Ireland Business Banking, acknowledged yesterday that the unit has not experienced the rapid growth of competing business banking units over recent years. He put this down to the bank's relative reluctance to get involved in property deals in the early days of the boom period.

"Those deals are very significant for market share," he said.

Bank of Ireland advanced €5.4 billion in new loans to SMEs in the year to March and is expecting to raise this by one fifth in the current year. This compares to a drawdown of €2.3 billion in the year to March 2003.

The bank has 20 per cent of this SME lending market, according to Mr Muckian.

Bank of Ireland's total retail business lending book stood at €11.6 billion at the end of March, with some €10 billion of this attributable to SMEs. This total is expected to rise to €14.5 billion by the end of the current year.

Mr Muckian said that his unit contributed about half of the €490 million in profits notched up by the group's retail network last year.

The unit has just completed a "transformation programme" which will see it advancing loans of up to €20 million to SMEs. Larger deals will be handled by Bank of Ireland's corporate banking division.