Private Sector Credit

Économiste Monétaire

The Figures for March '09 PSC show a -3.4% Q-on-Q and -14.7% for construction lending. PSC increased by €1.173bn Q-on-Q, but €2.382bn is accounted for by financial intermediation. Residential mortgage lending, adjusted for securitisation, increased by 0.3% Q-on-Q. Real estate activities increased 0.7% Q-on-Q and 7.7% Y-on-Y. Some of the drop in construction and rise in real estate activity is from reclassifications, e.g. a half-built house being reclassified once completed, which is explained below in an extract.

The figures below are not adjusted for securitisation:




From the CBFSAI Monthly Statistics (with adjustments):

Lending to the construction sector fell by €3.7 billion from Q1 2008 to Q1 2009, while there was an increase of €6.5 billion in the real estate activities sector over the same period. Some of the movements in these sectors can be explained by construction activity being reclassified out of construction and into real estate as construction projects were completed. Therefore, it is more informative to look at these sectors together. The annual growth rate of lending to the combined sectors was just 2.6 per cent in Q1 2009, compared with 21.8 per cent twelve months earlier. Credit advanced to these sectors declined for the second consecutive quarter in Q1 2009, falling by €104 million. The substantial decline in construction sector employment during 2008 continued in Q1 2009 at a more rapid pace, according to the Ulster Bank Construction PMI Index. Meanwhile data from the Department of the Environment, Heritage and Local Government show that the number of house completions in the first two months of 2009 was roughly half that of the same period in 2008. Forward-looking indicators, such as planning permissions granted, suggest that this trend will continue for both residential and non-residential developments.

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Expected and necessary. We need to get our house in order, so to speak.

Économiste Monétaire

The April monthly stats are out today. Anddddddd we are negative for m-on-m mortgage lending for the first time since 1990.

There was a net fall of over €100 million in residential mortgages (including securitised mortgages) during April, as new lending failed to keep pace with repayments on existing mortgages. This is the first time that residential mortgages have fallen since the monthly series began in 1990. This reflects low levels of activity in the housing market during the early part of the year. The Irish Banking Federation (IBF) series on new residential mortgages showed that the value of new mortgages issued during Q1 2009 was 68 per cent lower than in the same quarter last year. The Irish results of the Euro Area Bank Lending Survey also point to a progressive tightening of credit standards on loans to households, alongside falling demand. The annual rate of increase in outstanding residential mortgages declined to 3.4 per cent in April, from 4.2 per cent in March. This was the lowest annual rate of increase since 1986.

Irish banks have really taken to the un-rationed fixed rate long-term refinancing operations, nearly €75bn at the end of April, compared to €30bn last year. MROs at €46.5bn, compared with €7.9bn last year.

Credit cards:

While repayments on credit cards exceeded new spending in April, outstanding indebtedness rose by €53 million as a result of the posting of stamp duty to credit card accounts during the month. The annual rate of increase in outstanding indebtedness on credit cards fell further to 0.8 per cent in April, from 1.1 per cent in March.

Still nearly €3bn in outstanding debt on personal credit cards. M2 and M3 still negative y-on-y.

General PSC:

Private-sector credit (PSC) fell in April for the second consecutive month. Overall PSC has fallen by close to €2 billion since the start of 2009. Credit to non-financial corporate (NFCs) declined by nearly €900 million in April, with a fall in outstanding loans accounting for almost all of the decline. Following a fall of over €800 million in non-housing credit to households during Q1 2009, this form of credit declined further in April. The annual growth rate of PSC slowed to 2.4 per cent in April, from a revised 3.2 per cent in March.

Deposits:

• Overnight deposits fell by €719 million;
• Deposits redeemable at notice of up to three months increased by €1.6 billion; and
• Deposits with an agreed maturity of up to two years declined by €459 million.

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