Irish Private-Sector Credit (September 2018)

• Loans to households up 0.7% year-on-year
• Net mortgage lending up €722m in the year
• Household deposits up €633m in the month
• Banks held €11.3bn more deposits than loans at end-September
• 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 September, the same as in August. Adjusted for loan sales and securitisations, there was an annual fall of 1.4%. Mortgage loans, which account for 84% of on-balance sheet household loans, increased in net terms by €295m in the month. However, seasonal effects influence the quarter-end monthly figures for mortgage loans.

In year-on-year terms, net mortgage lending rose by €722m in September or 1.0%, representing the eleventh consecutive month of positive annual growth.

Net consumer lending declined by €17m in September. Lending was marginally positive on an annual basis, though, increasing by €9m in the past year. Net lending for other purposes rose by €6m in the month but declined by €141m or 5.9% over the year. This lending category includes loans such as those to sole proprietors and loans for the purpose of education.

Meanwhile, deposit from households increased in net terms by €633m in September, to stand at over €103bn, a new record-high. In annual terms, household deposit lodgements were €3.7bn higher than withdrawals, growing by 3.7% over the year. Overnight deposits drove both the monthly and annual increases, with declines seen across most other maturity categories.

Developments in loans and deposits mean that Irish households continued to be net funders of the Irish banking system last month. Banks held €11.3bn more household deposits than loans at end-September, 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 September 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 in a post-Brexit environment.

Private-Sector Credit (Source: Central Bank)
Household Credit (€m) % Change Year House Loans (€m) % Change Year Household Deposits (€m) % Change Year
2018 January 89,395 -0.1 74,729 0.1 98,509 2.2
2018 February 89,423 0 74,751 0.2 98,796 2.3
2018 March 89,697 0 75,105 0.3 99,683 2.6
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 90,810 0.6 75,727 0.8 102,041 3.4
2018 August 90,941 0.7 75,876 0.9 102,495 3.5
2018 September 91,858 0.7 76,774 1.0 103,137 3.7

Alan McQuaid (31/10/18)