Business Irish

Saturday 24 February 2018

Banks insist they support small firms despite 4.5pc drop in loans

Key issue is lack of demand for funds -- Irish Bankers' Federation

Laura Noonan

BANKS last night insisted they weren't reneging on promises to lend money to small businesses despite new figures showing another fall in loans to SMEs.

Data released by the Central Bank yesterday showed that lending to 'core' SMEs contracted by 4.5pc in the six months to the end of September.

The spread was particularly sharp for real estate SMEs, where lending dropped 7.6pc to €18.38bn, and construction SMEs, where lending dipped 6.6pc to €4.75bn.

Hotel and restaurant SMEs, meanwhile, saw their loans shrink just 4.6pc to €8.7bn, while lending to "retail, wholesale and repairs" fell 4.7pc to €7.7bn.

In commentary released with the data, the Central Bank said the fall in lending to SMEs had been "proportionately higher" than the fall in the banks' overall lending over the period.

But banks last night insisted the data did not reflect any reluctance on banks to fund Ireland's SMEs.

"What you're really seeing there is a lack of demand," said Michael Lauhoff, head of small business and agri at Bank of Ireland.

"Approval rates remain high, we're consistently above 80pc, but the key issue is the lack of requests."

The Irish Bankers' Federation (IBF), which represents all Ireland's major banks, also pointed to "continually declining demand" from businesses.

"As shown by the Central Bank, repayments on SME loans have been greater than draw downs," the IBF said in a statement.

"This suggests that SMEs themselves are reducing their level of outstanding borrowings."


The IBF also pointed to the fact that there is still €33bn in outstanding loans in Ireland's SME sector as evidence of the banks' continuing support of SMEs.

"Banks remain fully committed to supporting viable business and the Central Bank data is a clear reflection of that," IBF chief executive Pat Farrell stressed.

"Furthermore, up to €14bn in SME funding for new or increased credit facilities is being made available through 2010-11."

AIB was unable to provide comment as its executives were involved in an SME roadshow. Ulster Bank, one of the largest SME players, said there was no one to "facilitate" a request for comment.

Irish Independent

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business