Foreign loans drop 7.3% in first quarter


IRISH DOMESTIC banks continue to pull back on foreign lending, with Central Bank statistics showing that levels fell by 7.3 per cent, or €10.5 billion, to €133 billion in the first quarter of 2012. In the year to March 2011, foreign lending fell by 27 per cent on an annual basis.

According to the Central Bank, the reduction is expected given that the domestic banking groups are downsizing their operations abroad and disposing of overseas units. “This trend is likely to persist with the continuing downsizing, and retrenchment into the Irish market, by the domestic banks,” it added.

The greatest reduction was seen in lending to foreign credit institutions, which fell by 17.7 per cent down to €15 billion in the first quarter, followed by the private sector, where lending declined by 6.7 per cent to €105.3 billion.

Lending to foreign public sector institutions increased by 2.7 per cent to €12.7 billion.

The retrenchment from foreign markets was most notable in the fall in lending to the US and UK private sectors. The UK now accounts for 75 per cent of all foreign lending from domestic Irish banks, up from 57 per cent in September 2010, at €99.2 billion. However the amounts outstanding continue to decline, with loans falling by 6.5 per cent or € 6.9 billion in the first three months of the year.

In line with continued deleveraging by Irish banks in the US, lending levels declined further in the first quarter, by about €1.3 billion or 15.8 per cent. The US remains the second largest location for foreign lending.

France, Spain and Germany continued to hold a sizeable share of foreign claims, although they declined by a collective €201 million over the quarter. Lending to Poland fell by 3.5 per cent and by 7.7 per cent to the Isle of Man.