SMEs in property sector account for a third of loan drawdowns

Small and medium-sized businesses in the property sector accounted for a third of all bank loans drawn down by SMEs in the second quarter, new figures show.

Central Bank statistics show SMEs drew down €1.4 billion in loans from Irish banks in the April to June period with companies in the property sector accounting for 36 per cent of drawdowns to a record €522 million.

SMEs in the wholesale/retail trade and agriculture sectors accounted for 12 per cent of loans each.

Overall, €1.4 billion was lent to SMEs in the second quarter with lending in the year to the end of June totalling €5.3 billion, a decrease of €66 million versus the same period 12 months earlier.

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The outstanding stock of Irish SME credit on the balance sheets of Irish banks increased by 0.9 per cent in the quarter to €22.6 billion. This included €7.9 billion relating to property and €14.5 billion of core SME credit.

Outpaced

Borrowing outpaced repayments with net lending to Irish SMEs at €195 million; indicating the largest quarterly increase since 2011.

The Central Bank said repayments in the second quarter totalled €1.2 billion.

The weighted average interest rates on outstanding SME loans increased in the quarter, rising by 7 basis points to 3.58 per cent. The interest rate on new loan drawdowns decreased by 35 basis points and now stands at 3.79 per cent.

The Central Bank said interest rates varied greatly between sectors with higher-than-average rates charged in primary industries and business/administration sectors.

The total outstanding amount of credit to all Irish resident private-sector enterprises was €80.8 billion at the end of June.