Sunday 8 December 2019

Lending to businesses on the rise for second month in row

Donal O'Donovan

Donal O'Donovan

Lending to Irish business increased in November, in only the second monthly rise in 2012, according to new figures from the Central Bank.

Loans to non-financial companies increased by €287m. This was the second monthly increase recorded last year. Many cash-strapped businesses have complained of struggling to access new loans.

The pick-up in November lending helped lessen the overall decline in lending to business over the preceding 12 months.

The amount of lending outstanding to Irish companies declined by 3.9pc in the 12 months to the end of November, according to the new figures.

That is in part because historic debt taken on during the boom is gradually being paid off and not being replaced. Partly, though, it reflects the tough credit environment.

In November, the biggest increase in lending was new long-term debts of up to five years, which were up €167m over the period. There was a €113m increase in shorter-term borrowing.

Over the same period, Irish banks' reliance on funding from the European Central Bank (ECB) fell to €65.7bn, down from €78bn at the start of the month.

The figures include ECB loans to Irish branches of foreign banks but are mainly made up of loans to the main domestic lenders.

Reducing the dependence of banks on the ECB is a major focus for the Central Bank and for the EU/IMF Troika that is overseeing the bailout.

It is mainly being achieved by selling off bank assets to repay loans, but new bonds issued to private sector investors by Bank of Ireland and AIB in December will ultimately help cut the overall figures further and therefore normalise banks' funding profiles.

A sign of normalisation is a decline in the total value of so-called "self-help bonds" created by banks in November.

The bonds are created for use as collateral for borrowing cheaply from the ECB, and the total outstanding dropped to €3bn at the end of November, down from €8bn at the end of October.

Irish Independent

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