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Bank lending figures revealed

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Emma Cowan on July 3, 2014 - 8:30 am in News

Yesterday, the British Banking Association published detailed figures on bank lending to households and businesses in Northern Ireland for the first time. Emma Cowan looks at the statistics.

“Knowledge provides insight. More transparency will give everyone a clearer understanding of how the province’s economy is performing.” So said British Banking Association (BBA) chief executive Anthony Browne on yesterday’s publication, for the first time, of lending and deposit data for businesses and households for Northern Ireland’s local banks. The statistical report covers data from Ulster Bank, Danske, First Trust and Bank of Ireland as well as lending from Barclays, RBS, HSBC and Santander to small and medium firms locally.

Going straight to the big picture, what the statistical release shows is a modest return to faith in lending, with obvious benefits to an economy still scratching its way out of recession. It is important to note that the figures reported upon refer to the fourth quarter of 2013 – more recent data is not yet available. At the end of 2013, bank loans stood at £24billion, while deposits stood at £18billion. Almost all (88.6%) of household borrowing was taken up by mortgages but, at £83million lower than the previous quarter, this lending does not reflect the growing confidence in the housing/mortgage market that we have possibly witnessed since the start of 2014. Looking at business lending, which stood at £16billion for the quarter, 88% was in the form of loans and only 12% was for working capital requirements in the form of overdrafts.

Looking specifically at SME loan facilities, some 4,193 loans were approved in the last quarter of 2013, amounting to a total value of £362million, however, the ‘percentage approved’ rate, at 89%, lagged just behind the annual average of 89.9% (see table and chart below).

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Looking at specific sectors of business and industry, a quick glance at the figures released draws attention to two sectors: property and construction. Property, defined in the statement as ‘real estate, professional services and support activities’ accounted from some 11% of deposit stock outstanding, but 35% of loan stock outstanding, with £8.5billion in loans currently outstanding at the banks. On a lesser scale, the construction sector showed a similar imbalance between deposits and borrowing, with 4% of deposit stock outstanding but 15% (£3.5billion) of loan stock outstanding.

In overall terms, the consensus of considered opinion is that the first release of bank lending data shows good news for the Northern Ireland economy. BBA chief executive Anthony Browne said: “Overall, the levels of consumer and business borrowing are reflective of the wider economic and financial trends in Northern Ireland post the global financial crisis. These figures show us that lending approvals to small and medium-sized business in Northern Ireland is growing strongly. That’s very heartening – and will only give more encouragement to those entrepreneurs we all need to power economic growth.”

CBI Northern Ireland director Nigel Smyth was also positive in his view. He said: “More transparency on bank lending has been a key ‘ask’ of the business community for some time. As one of the key deliverables contained within last year’s Economic Pact it is very welcome to see published today the Northern Ireland specific lending data covering quarters three and four of 2013. The business community and the Northern Ireland Executive were united in the view that, in order to shed proper light on the bank lending picture locally, we needed a mechanism by which we could properly assess the contribution being made to local businesses.

“It is encouraging that quarter on quarter new lending to SME’s grew by £6m to £362m while the year-on-year figures in Q4 reflected a 46% rise in overall lending. This reflects the picture of an improving economy in which the demand for lending, both conventional in this case via banks and through other mechanisms such as venture capital, is increasing. Ensuring an adequate flow of credit is critical to underpinning the economic recovery which is underway.”



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