Quarterly Bulletin Q3 2013

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48 Financing Developments Quarterly Bulletin 03 / July 13 in the Irish Economy Credit Advanced to the NFC Sector by Irish Resident Credit Institutions Over the course of the last six months credit advanced to the resident NFC sector 11 has declined at an average annual rate of 4.2 per cent, to end-April 2013. During the preceding six months, the level of credit advanced had fallen by an average of 3.5 per cent. The quickening pace of decline is of concern, as loans issued by resident credit institutions are an important source of funding for indigenous corporations. In particular, this is true for SMEs, which, unlike the multinational sector, may not have easy recourse to alternative market-based funding or capital injections from overseas parent entities. The monthly net flow of credit to the NFC sector 12 , averaged minus €375 million over the last six months. The pace of decline in long-term loans eased with positive annual growth being recorded over the last number of months. The average annual rate of change in NFC loans, with an original maturity over five years, averaged 2.3 per cent over the six month period to April 2013, compared with a rate of minus 0.4 per cent during the preceding six month period. At end- April 2013, the annual rate of change for loans over five years stood at 3.9 per cent. Loans with a maturity of up to one year declined, falling to minus 2.7 per cent in April 2013. Despite the positive trend in longer-term contracts, loans with original maturity of between 15 10 5 0 -5 -10 -15 -20 -25 % Chart 16: Loans to Irish Resident NFCs, Annual Rates of Change Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep one and five years have continued to fall sharply, declining 19.3 per cent in April 2013 and averaging minus 14.8 per cent over the previous six month period ending March 2013. The accelerated decline in lending to NFCs is also reflected in credit advanced to nonfinancial enterprises, which include nonincorporated businesses as well as larger Nov Jan Mar May Jul Sep Nov Jan Mar 2009 2010 2011 2012 2013 Total Up to 1 year Over 1 year and up to 5 years Over 5 years Source: Money and Banking Statistics, Central Bank of Ireland. Table 2: Credit Advanced to Non-Financial Enterprises - Annual Percentage Change All Enterprises SMEs Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Construction and Real Estate -0.2 -2.0 -3.5 -4.1 -5.1 -3.7 -1.6 -3.5 -3.3 -3.6 Agriculture -3.6 -3.6 -3.4 -2.9 -1.8 -7.2 -4.9 -4.4 -3.5 -5.7 Manufacturing -5.7 -1.3 -1.8 -6.0 0.3 -6.6 -0.4 0.6 -2.5 -1.3 Wholesale/Retail Trade & Repairs -3.8 -2.4 -5.9 -8.2 -6.1 -6.8 -6.3 -8.0 -7.9 -8.0 Hotels and Restaurants -2.0 -1.9 -1.0 -2.3 -2.1 -3.6 -2.8 -3.0 -3.1 -3.5 Business and Administrative -8.7 -14.0 -11.6 -4.2 -3.8 -9.4 -4.8 -3.9 -5.6 -7.9 Services Other -6.2 -7.5 -10.7 -6.5 -5.5 -6.4 -5.4 -5.7 -5.3 -5.6 Total -2.1 -3.2 -4.5 -4.6 -4.7 -4.9 -2.9 -4.1 -4.1 -4.6 Source: Business Credit and Deposits, Central Bank of Ireland. 11 Credit advanced to the NFC sector includes loans to NFCs as well as credit institutions’ holdings of securities issued by NFCs. 12 The monthly net flow of credit takes into account and removes non-transaction effects.
Financing Developments in the Irish Economy Quarterly Bulletin 03 / July 13 49 6 5 4 3 2 1 Chart 17: Interest Rates on New NFC Loan Agreements Per cent per annum Basis points 500 450 400 350 300 250 200 150 100 since October 2012, remaining close to 3 per cent over the six month period to end-April 2013. Equivalent interest rates applicable to the euro area have not declined to the same extent, falling from a peak of 3.89 per cent in November 2011 to average approximately 3.31 per cent over the last three months. In terms of new business, rates applicable to loans up to €1 million, continue to be higher in Ireland when compared to the euro area. Corresponding new business rates reported by Irish institutions averaged 4.57 per cent over the last six months, compared with 3.8 per cent for the euro area. 50 0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2009 2010 2011 2012 2013 New loans up to and including €1 million, interest rate (LHS) New loans over €1 million, interest rate (LHS) New loans up to and including €1 million, margin over 3 month Euribor (RHS) New loans over €1 million, margin over 3 month Euribor (RHS) 0 1,000 750 500 Chart 18: Household Net Worth € billion Source: Retail Interest Rate Statistics, Central Bank of Ireland. 250 corporations. The annual pace of contraction was 4.7 per cent at end-March 2013, with enterprises engaged in wholesale/retail trade and construction/real estate experiencing the most significant decline (Table 2). Credit advanced to non-financial SMEs fell by 4.6 per cent at end-March 2013, compared with a decline of 4.1 per cent at the end of the previous year. The decline in credit advanced to SMEs was most evident in the wholesale/ retail trade & repairs, agriculture, and business & administration services sectors. Nevertheless, new lending drawdowns in the ‘agricultural’ sector continued to be strong at end-March 2013, amounting to €590 million over the last four quarters. Total new lending to SMEs amounted to just under €2.6 billion during the last four quarters to end-March 2013. Weighted average interest rates on outstanding loans to NFCs issued by Irish resident credit institutions have consistently fallen since July 2011, when rates peaked at 3.8 per cent. Despite this decline, rates have remained stable 0 -250 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Financial assets Liabilities Housing assets Net worth Source: Quarterly Financial Accounts, Central Bank of Ireland. Households Household net worth increased during Q4 2012 for the second consecutive quarter. It reached €461.6 billion, reflecting continued reduction in household liabilities by €2.8 billion and further investment in financial assets of €2.2 billion. The rise in financial assets marked an increase in the value of insurance technical reserves and, to a lesser extent, increased investment in financial assets. There has been a negligible change to the value of housing assets over the quarter.
Page 1: JULY 13 Q3 Central Bank Quarterly B
Page 5 and 6: Contents Section 1 Forecast Summary
Page 7 and 8: Section 1 Quarterly Bulletin 03 / J
Page 9 and 10: 7 Comment Annual National Accounts
Page 11 and 12: 9 The Domestic Economy Overview n A
Page 13 and 14: The Domestic Economy Quarterly Bull
Page 33 and 34: 31 An Timpeallacht Gheilleagrach Le
Page 35 and 36: 33 Financing Developments in the Ir
Page 37 and 38: Financing Developments in the Irish
Page 49: Financing Developments in the Irish
Page 55 and 56: 53 Developments in the Internationa
Page 57 and 58: Developments in the International a
Page 73 and 74: 71 EU-IMF Financial Assistance Prog
Page 75 and 76: EU-IMF Financial Assistance Program
Page 77 and 78: EU-IMF Financial Assistance Program
Page 79 and 80: 77 Developments in EU Financial Ser
Page 81 and 82: Developments in EU Financial Servic
Page 83 and 84: Developments in EU Financial Servic
Page 85 and 86: Section 2 Quarterly Bulletin 03 / J
Page 87 and 88: Analysis of Recent Monetary Operati
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Analysis of Recent Monetary Operati
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Analysis of Recent Monetary Operati
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Section 3 Quarterly Bulletin 03 / J
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Statistical Appendix Quarterly Bull
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