1/02/2011: Credit supply and deposits in Ireland

CBofI released monthly data for December 2010 on credit supply and deposits in the Irish financial institutions.

Updated charts and some analysis:
Irish private sector credit continued to contract in December, having fallen 0.98% mom and -10.7% yoy in total. Overall, credit outstanding fell €3.33bn in December mom and €40.23bn yoy.
Credit has fallen across all categories, except one:

• Household credit fell 4.72% (-€6.49bn) mom and 6.41% (-€8.98bn) yoy
• Mortgages credit fell 7.05% (-€7.55bn) mom and 9.65% (-€10.63bn) yoy
• Non-financial corporations credit fell 2.63% (-€2.5bn) mom and 37.08% (-€54.34bn) yoy
• Insurance and pension funds sector credit rose 5.36% (€5.66bn) and was up 26.18% (€23.09bn) yoy
• Combined non-financial sectors and households credit fell a massive €63.32bn in 12 months to the end of December 2010.

Onto deposits next:

Headline figure is that total deposits fell 2.24% (-€3.86bn) mom and 8.41% (-€15.46bn) yoy. This was backed by deposits declines across two out of three core components:
So:

• Household deposits rose 0.71% (€669mln) mom but fell 4.57% (-€4.53bn) yoy
• Non-financial corporate deposits were down 5.18% (-€1.83bn) mom and 17.64% (-€7.17bn) yoy
• Insurance and pension funds sector deposits fell 6.29% (-€2.7bn) mom and 8.57% (-€3.77bn) yoy
• Non-financial sector and household deposits fell €11.693bn in 12 months through December 2010.

The relative changes in deposits and loans outstanding implied changes in the ratio of loans to deposits - an instrument for the leveraging taken on by the economy at large.

Overall, Irish economy achieved a very modest reduction in the ratio in 2010:

• Total private sector credit to deposits ratio fell 2.53% in 12 months to the end of December 2010 reaching 198.81%
• Lowest deleveraging took place in the household sector, where the ratio fell 1.93% in 12 months and currently stands at 138.56%
• Highest degree of deleveraging was achieved in the non-financial corporate sector, where the ratio declined 23.6% yoy in December (though it rose by 2.69% mom) reaching 275.68%
• Insurance and pensions funds sector actually increased overall leverage ratio by 38% in 12 months to the end of December, reaching the ratio of 276.6%

Overall, outstanding loans exceeded domestic deposits by 98.81% in the end of 2010.