Household lending falls in March

The decline in private sector deposits in Irish banks accelerated in March, while loans to households and Irish companies also fell.

On an annual basis the level of deposits declined 10.1 per cent by the end of March, slightly faster than the 9.8 per cent recorded at the end of February, suggesting confidence in Irish lenders has not improved.

While deposits from households were down 5.4 per cent, deposits from companies fell by 10.7 per cent. The decline in deposits from other financial intermediaries (OFIs), insurance corporations and pension funds weighed on the figures, with a fall of 19.3 per cent.

Loans to Irish households fell by 5.1 per cent in March, static on an annual basis, as people paid down debt.

Residential mortgage lending continued to fall, declining by 2.6 per cent compared to a year earlier. Lending for consumption and other purposes was 13.4 per cent lower.

Monthly data showed a fall of €392 million in lending to households, based on underlying transactions, as loans for consumption purposes fell by €211 million.

The net flow of loans to households on a monthly basis was an average of minus €457 million for the three months ending March 2011.

Lending to companies was 1.4 per cent lower in the year ending March 2011, a slight improvement on the 1.6 per cent decline in February.

During the month, there was a reversal of trend with longer-term loans to companies rising by €226 million. Medium-term loans fell by €358 million.

However, despite the rise in March, there was a contraction over the year in loans with a maturity of more than five years. The Central Bank noted the pace of contraction has eased somewhat, with lending falling by 7.3 per cent on an annual basis.

Companies continued to make use of short-term facilities such as overdrafts, rising by 12.1 per cent in the year to March.

The statistics showed credit institutions had €118 million less in holdings of debt and equity securities issued by the Irish private sector in March.

This rose on an annual basis, mainly due to rising holdings of debt securities issued by financial intermediaries such as the National Asset Management Agency.

According to the Central Bank, the Nama transfer process has increased credit institutions’ holdings of other financial intermediaries debt securities by of 59.4 per cent in March.