New lending to SMEs rises by €200m

New lending to SMEs rose by €200 million in the first quarter of 2016, new figures from the Central Bank show, but total lending to the sector is still falling and was down by 10 per cent on the year.

According to new figures from the Central Bank for the first three months of the year, gross new lending to SMEs was € 200 million higher than in the same period in 2015, rising to € 657 million, as draw-downs, particularly for property investment and development, continued to increase.

However bank credit to all Irish SMEs declined for the fifteenth consecutive quarter , as the outstanding stock of SME credit fell by 2.6 per cent to stand at € 41.5 billion. This represented an annual decrease of 10 per cent.

SMEs were able to access a cheaper cost of funding during the first quarter, as the weighted average interest rate on new nonfinancial SME loan draw-downs during was 4.44 per cent , a decrease of 27 basis points over the year. However, despite the decline, rates on new lending are still higher than those applying to the existing stock of Irish SME loans, which averaged 3.06 per cent at as of the end of the first quarter.

Transport and storage (-136 basis points) and property (-93 basis points) saw the largest decline, while construction SMEs experienced a weighted average decline of 100 basis points, although they continue to attract one of the highest interest rates on new drawdowns. Agriculture and wholesale/retail SMEs continue to pay higher than average rates for funding.

Deposits from all Irish private-sector enterprises increased by € 3.1 billion in the 12 months to Q1 2016, up to € 85.6 billion.