Banking credit down €51.5 million in July

Banking credit to Maltese residents fell by €51.5 million in July, a 0.5% reduction, turning the annual rate of credit growth to a negative -0.4%.

The decline stemmed from a fall in credit to both general government and other residents.

Credit to general government contracted by €19 million, or 0.8%, during the month as a drop in banks' Treasury bill holdings was only partly offset by a rise in their portfolios of government stocks. Reflecting these movements, the annual growth rate of credit to general government fell from 2.3% in June to -0.6% in July.

Meanwhile, credit to other residents dropped by €32.4 million, or 0.4%, following a drop in loans granted to private non-financial corporations (NFCs) operating in the wholesale and retail trade sector and in the construction sector.

Together these offset a rise in mortgages granted to households. On an annual basis, growth in credit to other residents also went into negative territory in July, falling to -0.3% from 0.2% in June.

The Central Bank of Malta issued its commentary on the release of monetary statistics for July 2013.

Deposits held by residents of Malta with resident banks or monetary financial institutions (MFIs) expanded by €70.4 million, or 0.8%, but grew slower than a month earlier (5.2% compared with 5.7%).

Overnight deposits expanded by €49.6 million, or 0.9%, during the month driven by balances belonging to private non-financial corporations (NFCs) and, to a lesser extent, households. The annual growth rate of these deposits stood at 10.4%.

Deposits with an agreed maturity of up to two years rose by €21.3 million, or 0.6%, mostly due to an increase in balances belonging to private NFCs and households which offset a decline in deposits held by public NFCs. On an annual basis the growth rate of these deposits remained negative at -1.0%.

Meanwhile, deposits redeemable at a notice of up to three months, which account for a very small proportion of resident deposits, fell by €0.6 million, or 0.5%, as balances belonging to households and private NFCs declined.

Net foreign assets belonging to resident MFIs contracted by €24.1 million, or 0.2%, as a rise in foreign liabilities exceeded an increase in the corresponding claims.

The increase in the former mainly reflected a higher level of foreign deposits held with resident banks. Similarly, the rise in claims predominantly reflected higher banks' deposit balances held abroad. Cross-border transactions of international banks that operate from Malta often account for large movements in both foreign assets and liabilities. Net foreign assets contracted by 3.6% in the year to July, following a fall of 1.2% in the twelve months to June.

In July, the weighted average interest rate paid by MFIs on all outstanding deposits belonging to Maltese households and NFCs declined by 1 basis point to 1.42%. Meanwhile, the weighted average interest charged by resident MFIs on outstanding loans to resident households and NFCs dropped by three basis points to 4.30%.

Compared with a year earlier, the weighted average deposit rate was 2 basis points higher while that charged on loans was three basis points lower.