Monday 27 March 2017

Jittery depositors pull €525m from lenders in three months

banks

Siobhan Creaton

Depositors are continuing to take their cash out of Irish banks with new Central Bank figures showing that €525m was withdrawn between April and June last on top of €1.6bn in the previous three months.

According to the bank, this brings the total amount of deposits withdrawn from banks here in the year to the end of June to €5.3bn.

The figures also show that banks are continuing to lend less money to personal customers and at the end of June the total amount of loans, including mortgages, was €156.1bn. The bank says there were €87bn in deposits owned by private individuals at Irish banks in June.

This is down almost 1pc on the previous quarter and the scale of cash that was withdrawn from the Irish banks was much lower than the 1.8pc drop in the previous three months.

In terms of bank lending, the figures show the number of mortgages being granted continued to slump, down 2.2pc, the sixth quarterly decline in a row.

This brings the total amount of home loans to €98.3bn. This is a fall of 3.7pc since the peak mortgage lending in June 2009.

Standard variable rate mortgages, trackers and one-year fixed rate mortgages made up about 86pc of outstanding home loans at the end of June.

Tracker mortgages accounted for just half, or 54pc, of these loans, fixed-rate mortgages fell by €319m while standard variable rate mortgages fell by €284m over the three-month period.

Mortgages to owner-occupiers made up 74pc of the mortgage loans on the bank's books at the end of June.

Buy-to-let mortgages accoun- ted for €24.5bn, or 25pc, of all home loans while loans to purchase holiday homes were just over 1pc of all home loans.

The figures also show that bank lending to the manufacturing sector was down 10pc, companies in the business and administrative services sector fell by €61m while lending to the agriculture sector fell by around 2pc.

The continuing shift in deposits comes as the IMF warned this week that European banks, including those in Ireland, could suffer dangerous withdrawals of cash if bank funding markets seize up due to the euro crisis.

Greek default

The warning comes as concerns about a possible Greek default could once again make it difficult for banks to raise money on the wholesale funding markets.

A number of big European banks are already experiencing problems accessing funds, including one of France's major banks, BNP Paribas, which has plans to raise money in the Middle East. The IMF noted the major deposit outflows here at the height of the banking crisis in 2009 and 2010 and said that while this had steadied since, the renewed uncertainty could again pose problems.

"It is essential to prevent these withdrawals from moving into a more virulent phase, as has happened in past emerging market crises," the IMF report said.

Its warning followed a report by the European Systemic Risk Board that said threats to the financial system had increased considerably as economic growth prospects were now being severely dampened on foot of the euro debt crisis.

Irish Independent

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