New Lending To SMEs Up But Overall Figures Are Down 10%

/ 21st June 2016 /

Central Bank figures released today show that gross new lending to SMEs was €200m higher in Q1 2016 when compared with Q1 2015, rising to €979m, as draw-downs, particularly for property investment and development, continued to increase.

However, bank credit to all Irish SMEs declined for the fifteenth consecutive quarter in Q1 2016. The outstanding stock of SME credit declined by 2.6% over Q1 2016 to stand at €41.5 billion. This represented an annual decrease of 10%.

Meanwhile, gross new lending to non-financial, non-property-related SMEs, at €657m in Q1 2016, was almost identical to the same quarter in 2015. The Central Bank said that draw-downs for agricultural purposes continued to dominate.

The outstanding stock of SME credit includes €9.3bn of financial intermediation credit, €14.4bn relating to property (real-estate and construction) and €17.8bn of non-financial, non-property, or ‘core’, credit.

Property-related lending to SMEs no longer constitutes the largest share of outstanding SME credit, mainly due to loan sales and large repayments over 2015. In annual terms, property-related SME loans declined by 12% in the first quarter of 2016, with SMEs engaged in this sector repaying €2.4bn more than was drawn down in new loans.

Despite declines in outstanding credit to property-related SMEs, gross new lending has been increasing since early 2015, with €962m drawn down over the past 12 months. In Q1 2016, €322m was drawn down, representing 33% of new non-financial SME lending.

Private Sector Credit

The total amount of credit outstanding to all Irish private-sector enterprises on the balance sheet of resident credit institutions was €106.7bn at the end of Q1 2016. Excluding financial intermediation, which accounts for 55% of total credit, outstanding stock was €48.5bn at the end of Q1. SMEs account for 66% of non-financial credit.

Non-financial credit declined by 6.4% in the 12 months to end-Q1 2016, as private-sector enterprises repaid €3.6bn more than was drawdown in new loans. The decline was driven by property-related credit, with SMEs accounting for most of the decline.

Deposits from all Irish private-sector enterprises increased by €3.1bn in the 12 months to Q1 2016 to stand at €85.6bn, reflecting year-on-year growth of 3.8%.