Saturday, July 2, 2011

02/07/2011: SMEs and smaller corproate loans rates

An interesting chart of rates charged on new business loans across SMEs and households - my calculations based on Table B.2.1 from the Central Bank database:
In April 2011, the spread between Non-Financial Corporate Loans volume under €1 mln over those for house purchases were:
  • Floating rate and up to 1 year fixation corporate loans v similar house purchase loans: 1.54 percentage points, up from 1.18 in March and well above the historical average spread of 1.16 percentage points. Historical average spread for the period January 2008-present is 1.23 percentage points. April 2011 new business rate spread is the highest since January 2009.
  • Over 1 year fixation rates spread stood at 1.88 percentage points in April, up on 1.63 percentage points in March 2011. Historical average is 1.02 percentage points and average spread for the period since January 2008 is 0.99 percentage points.
Hence, overall, setting aside the pesky issue that very little new credit is issued by the banks, current credit conditions are clearly pricing historical highs in terms of risk premium for smaller corporate loans. For businesses operating in Ireland, the credit crunch is only getting crunchier, it seems.
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