Irish Private-Sector Credit (August 2018)

• Loans to households up 0.7% year-on-year
• Net mortgage lending up €677m in the year
• Household deposits up €450m in the month
• Banks held €11.6bn more deposits than loans at end-August
• Loan to deposit ratio at just 0.89

Loans to households up 0.7% in the year

Loans to Irish households rose at a rate of 0.7% year-on-year in August, up from 0.6% in July. Adjusted for loan sales and securitisations, there was an annual fall of 1.4%. Mortgage loans increased in net terms by €32m in the month, the third consecutive monthly rise.

In year-on-year terms, net mortgage lending rose by €677m in August or 0.9%, representing the tenth consecutive month of positive annual growth.

Non-housing loans decreased by 0.4% or €62m in year-on-year terms to end-August, representing four consecutive months of annual declines. Drawdowns on consumer loans exceeded repayments by €96m in the year to end-August, the lowest annual net lending figure seen since 2016. Loans for other purposes continued to record negative net flows, with repayments over the 12 months to end-August exceeding drawdowns by €164m.

Meanwhile, deposit from households increased in net terms by €450m in August, reversing a net decrease seen in July. Overnight deposits predominantly drove this increase. In annual terms, household deposit lodgements were €3.5bn higher than withdrawals, growing by 3.5% over the year.

Developments in loans and deposits mean that Irish households continued to be net funders of the Irish banking system last month. Banks held €11.6bn more household deposits than loans at end-August, with the loan to deposit ratio standing at 0.89.

The latest set of credit figures are once again a mixed bag, with some good and bad features. The very high level of deposits despite ultra-low interest rates still suggests that households remain cautious all things considered, and appear reluctant to take on more debt.

Notwithstanding the caveats relating to the credit gap indicators at this time, the August banking data continue to indicate a weak overall credit environment in Ireland. At the end of the day, credit will need to flow at a much stronger level than currently if the economy is to continue to grow strongly over the long-run.

Private-Sector Credit (Source: Central Bank)
Household Credit (€m) % Change Year House Loans (€m) % Change Year Household Deposits (€m) % Change Year
2018 January 89,765 0.4 74,725 0.1 99,611 3.3
2018 February 89,793 0.4 74,747 0.2 99,898 3.4
2018 March 90,067 0.4 75,101 0.3 100,785 3.7
2018 April 88,983 0.3 73,918 0.3 101,104 2.9
2018 May 88,776 0.3 73,817 0.4 101,284 3.7
2018 June 90,530 0.5 75,578 0.7 102,073 3.4
2018 July 90,812 0.6 75,727 0.8 102,051 3.4
2018 August 90,944 0.7 75,876 0.9 102,505 3.5

Alan McQuaid (28/9/18)