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News : Irish Economy Last Updated: Feb 28, 2013 - 3:45 PM


ECB support for banks in Ireland fell to €67.1bn at end-January
By Finfacts Team
Feb 28, 2013 - 3:40 PM

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The Central Bank said today that  borrowings from the Central Bank as part of Eurosystem monetary policy operations under the control of the ECB, fell by €4.3bn in January 2013. The outstanding stock of these borrowings amounted to €67.1bn at end-January. Domestic market credit institutions2 accounted for €55.7bn of this total outstanding stock.

The Central Bank also that loans to Irish households fell at a rate of 4% in the year ending January 2013, following a decrease of 3.9% in December 2012. Lending for house purchase was 1.8% lower on an annual basis at end-January, while lending for consumption and other purposes decreased by 10% over the same period.

Lending to households declined by €816m during the month of January, following a net monthly decrease of €372 m during December. The change during January was mainly driven by decreases of €405 m and €344 m in housing and consumption related loans respectively. Meanwhile, loans for non-housing and non-consumption purposes were €68 m lower over the month.

Lending to Irish resident non-financial corporations (NFCs) declined by 3.3% in the year ending January 2013, following a decrease of 3.6% in December. During January 2013 loans to NFCs fell by €214 m. The monthly net flow of loans to NFCs averaged minus €104 m in the three months ending January 2013, compared with an average of minus €184 m in the three-month period up to end-December 2012.

Irish resident private-sector deposits rose at an annual rate of 3.7% in January 2013, following a 2.5% increase in the year ending December 2012. Deposits from households were 1.2% higher on an annual basis at end-January 2013, while deposits from insurance corporations and pension funds (ICPFs) and OFIs increased by 8.2%. Deposits from NFCs rose by 5.2% over the same period.

There was a month-on-month increase of almost €1.4bn in Irish resident private-sector deposits during January 2013, reflecting increases across all four of the depositor sectors. Household and NFC deposits increased by €33 m and €120 m, respectively, while deposits from OFIs and ICPFs increased by €400 m and €815 m, respectively.

Private-sector deposits from non-residents declined by €1.1bn during January 2013.

Dermot O'Leary, chief economist of Goodbody, commented today:

"Private sector deposit growth at 4% yoy…

Deposit growth picked up in January. Following a €1.4bn increase in the month, deposit growth strengthened from 2.5% yoy in December to 3.7% yoy. Within this, growth in deposits from insurance companies and pension funds (ICPFs) accounted for the majority of the monthly increase.

…with deposits in covered banks up by 5% yoy

An earlier release by the Department of Finance revealed that deposits in the covered banks fell by €1.4bn in January, but this was exclusively due to the fall in sterling deposits, in turn primarily due to the fall in the value of sterling relative to the euro. Despite this fall, deposits at the covered banks are still up by €7.1bn (4.8%) over the past twelve months and are on a gradual upward trend since the recapitalisation of the banks in early 2011.

Deleveraging continues but focus should be on new lending

January, household lending fell by 4% yoy, with loans for house purchase down by 1.8% yoy and consumer lending down by 11.9%. Loans to NFCs fell by 3.2% yoy. All of these declines are in line with trends seen for the past three years and do not provide us with much in the way of new information. More important are the trends in gross lending; on this front, there have been more positive signs in relation to mortgage lending, with IBF data showing new lending was up by 57% yoy in Q4. It is vital that these trends also feed through to the non-financial corporate sector to sustain the modest recovery in investment."

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