BANK LENDING to businesses of most kinds continued to decline in the three months to the end of June, according to figures published yesterday by the Central Bank.

Of the eight “non-property, non-financial” business sectors, five registered declines in total outstanding bank borrowing, while three saw increases.

Outstanding bank lending to the “construction and real estate” sector exceeded all eight other private business sectors combined, standing at €81 billion at the end of June. The skewed nature of the lending profile reflects the willingness of banks to offer very easy financing to property investors of any kind up to 2008.

On an underlying basis, according to the Central Bank, the property sector reduced its total bank borrowings by 2.5 per cent in the second quarter of 2010 compared to the first.

The underlying figures also show that the hotels and restaurants sector experienced a massive 17.4 per cent credit contraction in just three months.

Businesses providing services to other businesses (excluding the real estate sector) reduced their stock of borrowings by 2.8 per cent.

Smaller reductions were recorded in manufacturing; wholesale and retail and the sector providing services to households (the latter includes private hospitals and schools). Three of the eight sectors registered increases in total bank borrowings between the first and second quarters.

The electricity, gas and water supply sector, though still the smallest borrower of the eight, grew strongest. A quarter on quarter increase of 6.3 per cent on an underlying basis is likely to reflect greater investment by private companies in renewable energies and related technologies.

The “transport, storage and communications” sector increased its total borrowings by more than 5 per cent, possibly reflecting stronger export activity.

The only other sector among the eight to which banking lending increased quarter on quarter was primary industries, which includes agriculture, forestry, fishing, mining and quarrying.

The private sector credit figures released yesterday also include lending to individuals and households. At the end of June, more than €160 billion was owed to banks. Almost 90 per cent of this was for mortgages.

The remaining 10 per cent is for car and student loans. The stock of this sort of lending contracted by more than one-tenth on a quarter on quarter, underlying basis.