FOREIGN LENDING by the Irish banks dropped by 3.3 per cent or €6.4 billion to €187 billion in the first quarter of the year on the previous quarter as the lenders reduced their international business.

Britain and Northern Ireland accounted for the largest amount of foreign claims by Irish banks, with €115 billion in the first quarter, up from €1.8 billion, Central Bank figures show.

The biggest decrease in claims was in Germany where Irish bank lending fell by €853 million, or 17.5 per cent, to €4 billion over the three months, followed by the US, where lending fell €3.3 billion, or 14.4 per cent, to €19.5 billion.

Lending to credit institutions fell by €7 billion, or 24 per cent, to €22 billion and to private individuals by €3.5 billion, or 2.3 per cent, to €153 billion over the quarter.

Overseas lending to the public sector rose 50 per cent, or €4 billion, to €12 billion in the period.

Non-bank private sector claims accounted for 82 per cent of foreign claims in the first quarter.

The banks have been shrinking their overseas business to reduce their loans-to-deposits ratios to a target of 122.5 per cent (€122.5 in loans for every €100 on deposit) from 180 per cent by the EU-IMF deadline of the end of 2013.

“This trend is likely to persist with the continuing downsizing of and retrenchment into the Irish market of the domestic banks,” the Central Bank said.

Total foreign claims have fallen by 20 per cent in the year to March 2010 and by more than €100 billion, or 36 per cent, since they peaked in September 2008.

The banks must sell €72 billion in loans and other assets to bring loans closer in line with deposits to make them self-sufficient again.

Anglo Irish Bank is selling its $10 billion (€7 billion) US loan book, and Bank of Ireland is selling its US commercial property business.

AIB agreed to sell a portfolio of about $1 billion of US commercial property loans last month.