Bank deposits fell 6.7% in November, data shows

DEPOSITS continued to seep from banks last month, while lending to households and businesses declined again, according to the latest data from the Central Bank.

Deposits, traditionally a key source of bank funding, fell by 6.7 per cent in November, according to the Central Bank. Household deposits were 4.5 per cent lower, while business deposits dropped by 14.9 per cent.

Overall, the negative net monthly flow in deposits was €5.2 billion in November, bringing the three-month average to minus €2.1 billion and forcing banks to increase their reliance on funding from the European Central Bank.

Lending to households was down 4.8 per cent on an annual basis, with stark cutbacks seen in loans for “consumption and other purposes”.

Lending was 15.6 per cent weaker in this category, with mortgage loans 1.7 per cent down on levels seen a year earlier.

Businesses also borrowed less, with loans down 1.9 per cent in November compared to the same month of 2009. This followed a revised annual fall of 1.8 per cent in October.

The Central Bank said net household lending in November saw a negative flow of €193 million, following a revised negative net monthly flow of €783 million in October.

Underlying the November decline was a fall of €212 million in loans for home-buying and a €271 million drop in general “consumer loans”.

Household lending for other purposes including loans to partnerships, sole traders and investors, climbed by €219 million over the same period. The Central Bank noted that some of this increase could be attributed to outstanding interest being added on to existing loans.

Figures for the three months to the end of November show an average monthly negative flow of €418 million in household credit. This is based on an average decline of €163 million in mortgage loans, a €272 million drop in consumer loans and a €17 million negative average flow in other loans.

The Central Bank’s figures on business loans show €184 million more was repaid than was drawn down in November. The average monthly flow in the three months to November 30th was minus €308 million.

The data also points to a shortening in the terms of credit for businesses, with a rise of €625 million in loans of up to one year being more than offset by a €810 million drop in medium- and longer-term loans.

Within this, loans with a maturity of more than five years continued to show the biggest annual declines, falling by almost 9 per cent in the year to the end of November.

Short-term loans of up to one year, including overdrafts, were 8.3 per cent higher on an annual basis.

The Central Bank noted a €5.3 billion increase on banks’ holdings of debt and equity securities issued by the private sector, most of which relates to the National Asset Management Agency.

ECB FUNDING IRISH LENDERS LOOK TO EUROPE

IRISH LENDERS increased their reliance on European Central Bank funding by 13.7 per cent in November, as the Government applied for an international bailout.

The ECB funding-reliance of domestic lenders, including Irish and foreign-owned retail banks, rose by €11.7 billion to €97.3 billion from the end of October, according to data released by the Central Bank .

The overall ECB dependence of Irish-based credit institutions, including internationally focused banks with operations in Ireland, increased by €8.2 billion to €138.2 billion in the period. This marks a rise on the €136.4 billion of ECB borrowings that the Central Bank previously reported as of November 26th.

Lenders have become increasingly dependent on European Central Bank funding this year amid outflows of deposits and volatility in wholesale funding markets.

Bank of Ireland, the country's largest lender, said in mid- November that it was reliant on "monetary authorities" for €20 billion of funding, compared with €8 billion at the end of June. – (Bloomberg)