Lending to SMEs fell 6.3% in first quarter


ACCESS TO credit continued to tighten for Irish businesses in the first quarter of the year, with lending to small- and medium-sized enterprises (SMEs) falling by 6.3 per cent, or € 1.7 billion, in the year to March 2012.

According to data from the Central Bank, lending levels fell by €217 million or 0.8 per cent in the first three months of the year, bringing the total outstanding amount of lending to SMEs in these sectors at the end of the first quarter of 2012 to €27.1 billion

In total, Irish financial institutions had €219.6 billion in outstanding loans to Irish private-sector enterprises as of the end of March, with about half of this accounted for by the financial intermediation sector. This was down by 2.3 per cent, or € 2.3 billion, on the previous year.

New lending, which excludes lending related to restructuring or renegotiation of existing facilities, came to € 407 million during the first quarter, with firms operating in the agriculture sector accounting for about a quarter of these loans.

Unsurprisingly, there was a further decline in lending to property-related businesses, which declined by 0.2 per cent or € 104 million over the year to March 2012.

SMEs operating in this sector saw credit fall by 3.7 per cent over this period.

However, lending to SMEs increased in four non-financial, non-property related sectors during the first quarter: agriculture (€ 48 million); forestry, logging, mining and quarrying (€ 18 million); electricity, gas, steam and air conditioning supply (€ 24 million); and the education sectors (€14 million).

Irish businesses decreased their deposits in Irish banks during the first quarter by 0.5 per cent, or € 347 million, indicating an annual decline of 8.6 per cent or € 6.9 billion. The majority of this decline was due to a € 5.1 billion decline in deposits from the financial intermediation sector.