Lending to businesses improves

 

Figures published by the Central Bank this morning indicate a relative improvement in the lending conditions for businesses.

Lending to businesses continued to fall in September, but at a lower rate, with business lending declining by 1.4 per cent in the year ending September 2011, compared to an annual decline of 2.5 per cent in August.

On a monthly basis, loans to businesses increased by €594 million during September, following a decline of €436 million in August, though the increase was driven by short-term loans including overdrafts, rather than term loans.

While loans with a maturity of up to five years did increase, rising by €66 million during the month, loans with an original maturity of over five years dropped by €20 million.

Short term loans increased by €548 million during the month, following a decline of €353 million in August.

Lending to businesses averaged €105 million in the three months to the end of September, compared with an average of €22 million in the three month period to end-August.

Lending to households fell by 4 per cent in September compared to a year earlier, though the rate of decline was in line with the previous month., showing that the pace of decline appears to be stabilising. Mortgage lending was down 2.5 per cent, while lending for other purposes decreased by 8.9 per cent.

New figures on the amount of cash on deposit in Irish banks in September provide strong evidence that confidence in the system, and the Irish economy more widely, is returning.

In September, an increase of total deposits of almost ¤11 billion was recorded on the previous month.

The figures, published yesterday by the Central Bank, show the total deposit base of all banks located in Ireland rose to €590 billion in September. September marked the second consecutive month in which deposits grew. It followed a protracted period of precipitious decline.

In September 2010 a massive outflow of cash from the banking system began. Between August 2010, when the deposit base stood at €893 billion, and July of this year, the banking system lost one third of its total deposits.