Bank of Ireland lends €2.5bn to SMEs in first half of year

Credit approvals sum is 18 per cent higher than it was in first half of 2014

Bank of Ireland lent €2.5 billion to small and medium-sized businesses in the first half of the year and approved almost nine out of 10 credit applications from the sector, new figures released by the financial institution show.

The credit approvals sum was 18 per cent higher than it was in the first half of 2014, while the rate at which loans were approved remained constant.

The €2.5 billion figure includes new and increased lending and does not include restructured debts or lending to larger corporates.

The bank received a total of more than 34,000 business banking credit applications in the period, an increase of about 8 per cent year on year and an increase of about 17 per cent on the 29,000 applications that were received in the final half of 2014.

Based on analysis of Central Bank data, the bank says that it continues to be the main provider of credit to smaller firms, accounting for more than 50 per cent of new non-property lending.

Improved confidence

The bank said it continued to see improved confidence in the economic environment, with increased demand for credit reflecting signs of growth in the agri-business, retail, hospitality, property and motor sectors.

"Business owners are regaining the confidence to commit to overdue capital expenditure and are also tentatively considering new opportunities, a trend which we expect to accelerate as we move into 2016," said Bank of Ireland director of business banking Mark Cunningham.

Among the positive factors cited by the bank were a growth rate of 25 per cent in the passenger car market and a 56 per cent uplift in the market for light commercial vehicles.

The better fortunes of the tourism industry, which is one of the sectors vocally resisting Government proposals to increase the minimum wage, was also highlighted.

A 12 per cent year-on-year increase in international visitors to Ireland in the first five months has boosted activity among small hospitality businesses and has prompted a number of refurbishment and extension projects as well as property transactions, Mr Cunningham said.

He also noted that Ireland appeared to be on target for 10 million visitors by 2025, which if it happened could yield an additional 50,000 jobs.

Bad debts

Bank of Ireland is due to publish its first-half financial results on Friday.

In a note, analysts Eamonn Hughes and Colm Foley from the stockbroking firm Goodbody said lower bad debts would lead to an increase of about 70 per cent in underlying net income at the bank. Goodbody is forecasting net income of €462 million.

The bank’s bad-debt charge for the period may shrink by more than half to €180 million, its analysts suggested.

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