I was, rather lazily, waiting for someone else to post this, but the SME market report by the Central Bank is an important new resource, complete with data and tables in usable formats. The report is good collage-type work that deserves an airing. Let’s hope we see follow up reports in the same manner to give us a better picture of how the sector is evolving post-bailout.
SME Market Report
- Post author By Stephen Kinsella
- Post date June 29, 2014
- Categories In Uncategorized
- 6 Comments on SME Market Report
By Stephen Kinsella
Senior Lecturer in Economics at the University of Limerick.
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6 replies on “SME Market Report”
Anybody care to explain the rise of 15 billion in lending to Property/Investment/Development, between Mar 2011 and June 2011, to Irish Resident SME- Table A.14.1-outstanding. Is it a bank that was lost and found or have loans provided by subsidiaries of banks been repatriated, or what?
From the figure one could conclude that either Irish manufacturing is almost irrelevant or that banking support for Irish resident manufacturing is almost irrelevant.
At March 2014:
Loans to Non-Irish resident enterprises 5.346 billion
Loans to Irish resident enterprises 4.860 billion
Loans to Irish resident enterprises SMEs 2.142 billion
Not very comforting from the point of view of industrial policy.
At end of 2013 SME debt amounted to €55bn.
This paper is focused on sectors ex-property and finance and the value of the o/s debt is €21bn with a weighted default level of 41%.
So Morgan Kelly wasn’t daft after all to highlight the issue.
The other key point is that credit has been at a standstill in recent years.
The overall debt situation remains dire.
Ireland remains biggest debtor of the western world
@JR.. The big jump in Real Estate loans to SME’s in June 11 was due to a reclassification of existing loans according to the Central Bank.
One could draw two conclusions from the Report, both a challenge to conventional views. One is that there does not appear to be a significant unmet demand for SME credit, and that the credit demand that does exist is for working capital rather than for expansion.
The second conclusion is that SME loans ex property is only €25bn so absent a significant revival in mortgage lending it will be difficult for the Irish banks to grow their loan books.
Following Dan,
when I look for example at
a) Chart 5 of the ECB report, and compare Ireland to France
b) Chart 14, compare Ireland to Germany, France
c) Chart 15, wonder about the Netherlands
d) Chart 16, level of interest rate nearly never called an obstacle
e) Chart 2a That financing does not seem to be an overly important problem
and especially Figure 21 in the Report of the Irish Central bank (140626 SME Market Report)
I do not see SME credit availability as a significant problem.
BTW, if somebody knows where to find similar plots (to figure 21) for other European countries, would be nice to know
@Dan McLaughlin
“The big jump in Real Estate loans to SME’s in June 11 was due to a reclassification of existing loans according to the Central Bank.”
There is a little more to this ‘reclassification’ than meets the eye.
The reason I say this is that the 15billion increase in Irish resident SME loans did not come from within Ireland, as there was actually only a small increase of 5BN in total Credit Advanced to Irish Resident Private-Sector Enterprises (Table A.14). These increased slightly from 207BN to 212BN in the Mar11-June11 period, but there was no reduction at all in the total of Real Estate/ Land & Development loans to Irish residents.
It is clear therefore that the ‘reclassification’ came from abroad, resulting in my view that 15BN billion was reclassified onto to the liabilities of the Irish banking system between March and June 2011.
So where did the 15 billion additional liabilities come from?
Was there a corresponding reclassification of 15 billion worth of good assets (at 2011 market prices). Not, for instance, 15 billion worth of foreign property assets, that subsequently had to written down within the Irish banking system.
I think the ICB owe a better explanation on this one than than ‘reclassification’.
On the two conclusions that you draw I would not disagree with either. SMEs at present need funds for working capital or loan restructuring, survival in other words. The level of capacity usage is still low and there are still too few SMEs (food sector excluded) that are exporting. the biggest issue by far for most SMEs is lack of demand.
@Dan McLaughlin
On reflection (semi-mature), I am incorrect in my analysis above. If the overall loans to Irish residents have not increased in the relevant period, then it has to be a reclassification within Irish bank liabilities, and not from abroad.
With apologies to the ICB.