Deposits at guaranteed banks rise by €2.1bn

DEPOSITS AT the Government-guaranteed banks rose by almost €2.1 billion to €149 billion in March, a rise of almost 1 per cent and the largest increase since September, according to figures from the Department of Finance.

About half of the increase at AIB, Bank of Ireland, Permanent TSB and the former Anglo Irish Bank, now known as Irish Bank Resolution Corporation, came from growth in domestic deposits, which the department described as “an encouraging trend”.

Goodbody Stockbrokers chief economist Dermot O’Leary said in a research note that there appeared to be a trend of deposits switching from non-guaranteed banks to guaranteed banks.

Figures released by the Central Bank showed private-sector deposits at the guaranteed or “covered” banks rose to €103.9 billion at the end of March from €102.7 billion a month earlier.

Irish-resident private-sector deposits rose by €798 million, mostly due to an increase of almost €761 million in household deposits, bringing total Irish household deposits to €92.1 billion at all banks operating in Ireland including IFSC and foreign banks.

Total deposits at banks operating in Ireland declined by €15 billion primarily as a result of a €10 billion decline in deposits by euro area, non-Irish depositors.

The decline “largely reflects inter-affiliate transactions by IFSC-based banks”, the Central Bank said in its release on the money and banking statistics for March.

Borrowing by the Irish guaranteed banks from the European Central Bank fell to €65.4 billion at the end of March from €67.2 billion a month earlier.

Overall liquidity to the guaranteed banks totalled €110 billion, including €45 billion of exceptional liquidity assistance loaned by the Irish Central Bank in emergency lending.

ECB borrowing by domestic banks, including the guaranteed banks and foreign subsidiaries such as Ulster Bank and KBC, rose by €3.7 billion to €75 billion.

The Central Bank said the increase was due to the borrowing of three-year cash from the ECB through the longer-term refinancing operation, which flooded the euro area’s banking sector with more than €1 trillion in cheap funding.

While the funding at the guaranteed banks improved in March, lending to households continued to decline, falling by €167 million or 3.9 per cent on an annual basis.

Consumer loans and mortgages declined by €115 million and €15 million respectively in March.

Loans to non-financial companies rose by €34 million in March following a decline of €167 million the previous month.

“Although these latest banking figures are encouraging to some degree, particularly in relation to the deposits side, the underlying message from the data is still one of overall weakness and difficulties in the sector,” said Bloxham chief economist Alan McQuaid.