Property-related SME loans declined 11% in Q1

Property-related loans to Irish SMEs declined by 11 per cent in the first quarter of 2017 compared with the same period last year, according to new figures from the Central Bank.

The Trends in Business Credit and Deposits: Q1 2017 report also shows SMEs in the sector repaid €2.9 billion more than was drawn down in new borrowings.

Gross new lending reached €1.3 billion over the past twelve months, which was €353 million higher than the previous reporting period.

In the first three months of this year, draw downs totalled €290 million, or almost one quarter of total gross lending.

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Repayments of bank-related lending by the SME sector remains elevated, although it was lower than previous years. Property-related SMEs accounted for almost one-third of repayments during the period, with €440 million repaid in property-related debt.

Lending to core SMEs contracted by 7.4 per cent over the past 12 months, as €1.3 billion more was repaid than drawn down.

The hotels, and wholesale/retail trade sector, which repaid a combined €656 million more than was drawn down, mainly drove developments over the year. Credit to core SMEs remains consistently negative, in contrast to large enterprises.

Bank credit to Irish SMEs declined for the 22nd consecutive quarter. SME credit declined by 0.9 per cent over the quarter to stand at €27.9 billion. This represented an annual decrease of 8.9 per cent.

The outstanding stock of SME credit includes €11.8 billion relating to property (real estate and construction) and €16 billion of non-financial, non-property, or core credit.

Property-related lending to SMEs currently represents just over 42 per cent of Irish banks’ outstanding SME loan book. Loans sales and deleveraging in recent years have facilitated a reduction in stock.

New lending to non-financial, non-property related SMEs was €902 million, which was an increase of €245 million in comparison to the same quarter in 2016.

Draw downs for wholesale/retail trade and repairs and agricultural purposes dominated, despite consistently attracting higher than average interest rates.

Property-related lending constituted 42 per cent of outstanding credit to SMEs, and 24 per cent of new draw downs.