Lending to SMEs at lowest level in more than a year

Lending to small- and medium-sized enterprises (SMEs) fell 1.3 per cent year-on-year in the third quarter, which marked its lowest level since the middle of 2020, new data from the Central Bank shows.

Some €880 million was lent during the quarter, which represented a decrease of €12 million.

The data shows trends differed across economic sectors. For example, new loans to primary industries and real estate activity SMEs were down 14 per cent and 36 per cent respectively. In contrast, loans to wholesale/retail trade increased by 15 per cent on the same period in 2020.

The outstanding stock of SME credit on the balance sheets of Irish banks decreased by 2 per cent over the quarter to stand at €18.4 billion. This included €5.6 billion relating to property and €12.7 billion of core SME credit.

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Net lending to SMEs was minus €342 million. Annually, repayments exceeded new lending by €270 million or 1.4 per cent over the year to the end of September.

Estimated repayments by all SMEs were slightly higher than in the previous quarter at €1.2 billion. Annually, repayments by all SMEs were €4.5 billion, recording a year-on-year decline of 17.5 per cent when compared to the same period in 2020.

Gross new lending to core SMEs totalled €3.1 billion over a period of a year, representing the highest amount of loans advanced over a four-quarter period since mid-2020.

Year-on-year increase

This reflected a year-on-year increase of €67 million, signifying the first year-on-year increase within core SMEs since the first quarter of 2020. Quarterly net lending to core SMEs remained positive in the third quarter at €660 million.

The weighted average interest rates on outstanding SME loans decreased slightly in the quarter, declining by four basis points to 3.5 per cent. Over the year, there was a decrease of three basis points.

The interest rate on new SME loan drawdowns decreased by three basis points, and now stands at 3.81 per cent. SME interest rates varied between sectors. Higher-than-average rates were charged to the primary industries and business and administration sectors.