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News : Irish Economy Last Updated: Jun 30, 2011 - 5:47 AM

Central Bank says loans to Irish firms fell 3.9% in year to March; 25% of outstanding home loans for buy-to-let properties
By Finfacts Team
Jun 29, 2011 - 5:48 AM

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The Central Bank reported on Tuesday that the annual rate of change in non-financial private-sector business credit was down 3.9% at end-March, equivalent to a net flow of minus €4.5bn over the year. Separately, the Central Bank reported that 25% of outstanding home loans are for buy-to-let properties.

Credit advanced to the construction sector accounted for just under half of this decline over the year and was itself 46.3% lower on an annual basis. Meanwhile the underlying rate of change in real estate and development credit (which adjusts for the impact of transfers to NAMA) was minus 1.1%.

Excluding property-related and financial sectors, credit advanced to Irish private-sector enterprises stood at €41.7bn at end-March 2011, a decline of 3.8% on an annual basis. Credit advanced to the wholesale/retail trade sector had the largest share in the outstanding amount of credit to non-property and non-financial enterprises at 22.8%, followed by the hotels and restaurants sector at 19.5%. Credit to these sectors were 3.3% and 3% lower on an annual basis, respectively at end-March 2011.

Other prominent sectors in terms of credit outstanding were manufacturing and business and administrative services. Credit advanced to these sectors was 7.2% lower and 4.3% higher on an annual basis, respectively at end-march 2011. Both sectors witnessed quarterly declines during Q1 2011, which came to €83m for manufacturing and €382m for business and administrative services.

Credit advanced to the agriculture sector, which accounted for 10.7% of all non-property, non-financial credit to enterprises at end-March 2011, was 8.8% higher on an annual basis, mostly due to increases experienced during mid-2010.

The Central Bank said outstanding amount of loans advanced to Irish SMEs by resident credit institutions was €58.2bn at end-March 2011. This included lending to certain financial vehicle corporations in the financial intermediation sector, as their balance sheet size brings them into the SME category. Excluding the financial intermediation sector, loans outstanding to SMEs totalled €46.2bn at end-March, a decline of €864m during the quarter (1.8%) and €6.9bn over the year ending March 2011 (12.2%)

On household credit, the Central Bank reported that the total credit advanced to Irish private households of €119.6bn on the balance sheet of domestic banks at end-March 2011 follows a quarterly decline of 1.3% and an annual decline of 3.3%. Including loans for house purchase that have been securitised and continue to be serviced by banks, the total amount of loans to private households outstanding at end-March 2011 was €154.7bn.

The Bank said loans for principal dwellings accounted for 74% of on-balance sheet loans for house purchase at end-March. This share has been increasing since end-2009. The amount of loans for principal dwellings declined over Q1 2011 by €54m, as a net flow of minus €977m of variable rate loans (1.6%) was only partially offset by a rise of €923m in fixed rate loans (8.5%). Variable rate mortgages accounted for 83.9% of the outstanding amount of loans for house purchase at end-March (32% standard variable, 50.2% trackers, 1.6% up to 1 year fixed).

The outstanding amount of on-balance sheet loans for buy-to-let residential properties was €24.6bn at end-March, accounting for 24.9% of all loans for house purchase. There was a decline of €559m in these loans during Q1 2011 (2.2%). Variable rate mortgages accounted for 92% of the outstanding amount of loans for buy-to-let residential properties at end-March (28.1% standard variable, 63.7% trackers, 0.2% up to 1 year fixed).

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