SME Lending Demand Study Provides Helpful Clarity, says IBF

  • New initiatives underway to support the bank/SME relationship

The Irish Banking Federation (IBF) welcomes the clarity which the “SME Lending Demand Study”, published today by the Department of Finance, brings to the important issue of lending to SMEs.

Against a backdrop of continued difficult trading conditions for SMEs, the study shows reduced turnover and considerably reduced demand for credit.  And where credit is being sought by just over one-third (36%) of SMEs surveyed, it is largely for renewal or restructuring of existing facilities.   Notably, of those who did not apply for credit just 7% advise that it was because they believe that banks are not lending.

In finding that 54% of applications were approved (fully or partially) with a further 23% pending – a 70% approval when applications pending are excluded – the study significantly points to the impact that trading activity and in particular profitability have on banks’ credit decisions.  As the study states: “This suggests that banks are basing credit decisions on business performance and profitability factors”.  As the study further confirms, businesses with increasing or stable turnover and profitability are much more likely to be approved for credit.

Notwithstanding the challenging environment faced by all, IBF and its member banks remain fully committed to supporting in every way possible the SME sector as an all-important driver of economic recovery and growth.  To this end, the sector has been working on a range of new initiatives to support the bank/SME relationship, which includes the following.

  • Development with Chambers Ireland of a new website for SMEs which will be a comprehensive source of information on small business finance.  It will be launched in January.
  • Collaboration with other business sectors in developing a business plan template which would be adopted by borrowers and lenders alike.  It is expected that this work could be completed early in the New Year.
  • Implementation in January of the revised Code of Conduct for Lending to SMEs.

According to Pat Farrell, IBF Chief Executive:

“The SME Lending Demand Study helps to bring focus to the realities of the marketplace for both businesses and banks at the present time.  With SMEs facing very challenging trading conditions, the ongoing consideration for all lenders must be the viability and thus the bankability of the credit applicant.  At the same time, the Study points to areas where lenders’ own processes can   better accommodate the needs of the business borrower and where further business supportive initiatives can be developed.  As a sector we remain fully committed to supporting SMEs in every way possible.”

Note: To view a copy of the report on the Department of Finance website, please click here (this is an external link).

The Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Information: Felix O’Regan, Head of PR and Public Affairs, IBF, tel. 6715311, 087 6481644

Banks Continue to Proactively Assist Borrowers in Distress

The Irish Banking Federation (IBF) views today’s Central Bank statistics, which show 8.1% of all private residential mortgage accounts in arrears of more than 90 days, as reflecting the deteriorating economic situation for some borrowers.

While the vast majority of borrowers continue to meet their mortgage repayments, those borrowers facing difficulties are being assisted by their lenders where there is a reasonable basis for doing so.  Lenders are currently employing a range of measures to deal with distressed borrowers – as evidenced by the near 70,000 restructured mortgages now in place.  And they   continue to examine what further initiatives can be introduced in the context of the Report of the Interdepartmental Group on Mortgage Arrears (Keane Report).

At the same time, IBF notes that the level of repossessions still remains comparatively low – 21 per 100,000 mortgages here compared to 82 per 100,000 in the UK.

IBF continues to strongly encourage borrowers who are under pressure with their repayments to communicate with their lenders in order to find a workable arrangement that will assist in the management of their financial difficulties.

Note: The Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 80 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

 

Mortgage Market Activity Remains Weak in Q3

  • 3,607 new mortgages issued in Q3 2011 to a value of €623 million
  • Home purchasers continue to dominate the market

The IBF/PwC Mortgage Market Profile published today shows that 3,607 new mortgages to the value of €623 million were issued during the third quarter of 2011.

The volume of new lending in Q3 is down 50.3% by volume on the previous year and up 1.6% on the preceding quarter. And while this latest quarter represents the second consecutive quarter of growth, it is still too early to view this as an indicator of recovery in the market.

The key home purchaser segments of the market – First-Time Buyers and Mover-Purchasers – continue to dominate what is now a smaller market in terms of overall activity. Together they now account for some four-fifths of all mortgage credit issued. This means that the vast majority of mortgage credit now goes to the home purchasing segments of the market.

The IBF/PwC Mortgage Market Profile can be viewed on the web here.

Note: Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

IBF Statement on ECB Rate Reduction

The latest move by the ECB to lower the base rate by 0.25% is welcome in helping towards easing borrowing conditions for customers. Interest rates are a matter for individual institutions in a competitive environment – with due regard to the impact on the cost of funds, the interests of depositors as well as to their important role in supporting the wider economy. The result of previous interest rate changes is reflected in Ireland being among the lowest in the euro area for average housing loan costs – see the following chart.