THE OUTFLOW of deposits from banks in Ireland was €9.3 billion in June, the smallest decline in almost a year, according to figures released yesterday by the Central Bank of Ireland.

In September last year, there was a sudden and sharp decline in international confidence in the Irish banking system and the economy more widely. One manifestation of this was the withdrawal of cash deposits.

In August last year, Irish residents and foreigners had almost €900 billion on deposit in banks located in Ireland. By the end of last month, that figure had declined by one-third, to stand at €593 billion.

Most of the outflows occurred in the five months from September 2010. Since February this year, the rate of withdrawal has slowed.

The Central Bank breaks down the depositor base by three geographies: depositors resident in Ireland, those resident in the rest of the euro zone and those resident in the rest of the world. The latter grouping has accounted for more than half of the total decline in the deposit base. That trend was also in evidence in June, when €7.5 billion of the €9.3 billion total decline was accounted for by those resident outside the euro zone.

Irish residents have been far less inclined to withdraw deposits.

In June, the total cash amount they had lodged in banks in Ireland stood at just over €300 billion. This was unchanged on May and down by just under 15 per cent since August. By contrast, total foreign deposits have fallen by 45 per cent.

Of the €300 billion of Irish resident deposits in the banking system, fewer than one-third is accounted for by households.

In June, Irish household deposits stood at €92.2 billion, up very slightly on May and little changed from August of last year, when the figure stood at €96.5 billion.

The figures show Irish retail depositors have not withdrawn their cash from the banks in any significant amounts. Irish companies, by contrast, have been more risk-averse.

Insurance and pension funds have cut their deposits by a third over the August 2010-June 2011 period, to €11 billion last month.

Non-financial companies cut their deposits by just over 15 per cent over the same period. They stood at €30.9 billion last month.

Yesterday’s Central Bank figures also includes data on what banks do with the deposits and other funds they obtain. The most important function, from an economy-wide perspective, is providing loans to businesses and households.

The figures reveal that lending to the private sector rose month on month in both May and June. This is the first time since the banking crisis erupted in 2008 that there have been two consecutive months of lending growth. Most of this was accounted for by lending to other financial institutions.

Non-financial businesses also increased their aggregate borrowings in May and June, but by small amounts – €24 million and €124 million in each month respectively. Lending to households continued to fall, albeit by relatively small amounts compared to earlier declines.

This suggests that the contraction in lending to households may be bottoming out.