Resident Deposits up by €142 million in August 2013

In August, deposits belonging to residents of Malta and held with resident Monetary Financial Institutions (MFIs) expanded by €142.4 million, or 1.6% resulting in the annual growth increasing to 6% up from 4.7% in the previous month.

The increase in deposits was mainly attributable to a 2.2% increase or €117.6 million increase in overnight deposits, driven mainly by higher balances belonging to households and non-financial corporations (NFCs).

Deposits with an agreed maturity of up to two years rose by €25.6 million, or 0.7%, on the previous month, mostly due to higher balances held by insurance companies and pension funds. Nonetheless, these deposits continued to contract on an annual basis, but at a slower pace, with their rate of change reaching -0.3% from -0.9% in July. At the same time, deposits redeemable at a notice of up to three months fell by €0.8 million, or 0.7%, as private NFCs' balances declined.

Credit extended to Maltese residents

In August, credit granted by resident MFIs to residents of Malta rose by €116.3 million, or 1.0%, following an increase in credit to both general government and other residents. Consequently, the annual rate of credit growth turned positive, reaching 0.5% from -0.4% in July.

Credit to general government rose by €92.8 million, or 3.7%, following an increase in banks' Treasury bill holdings that offset a fall in their portfolios of Malta Government Stocks. As a result, the annual growth rate of credit to general government rose to 2.2% from -0.6% in the previous month.

Meanwhile, credit provided to resident sectors other than general government, which mainly consists of private sector entities, rose by €23.5 million, or 0.3%, following four consecutive monthly declines.

The increase in credit stemmed mainly from a rise in loans granted to public NFCs and to households for house purchases. Together these offset a monthly decline of €14.6 million, or 0.4%, in credit to private NFCs.

Net foreign assets of Maltese MFIs

Net foreign assets belonging to resident MFIs contracted by €92.0 million, or 0.8%, as a substantial expansion in foreign liabilities exceeded a rise in corresponding claims. The increase in the former mainly reflected a higher level of foreign deposits held with resident banks. On the other hand, the rise in claims predominantly reflected growth in resident banks' deposit balances held abroad. Large movements in foreign assets and liabilities often reflect cross-border transactions of international banks that operate from Malta. Net foreign assets contracted more sharply on an annual basis, falling by 5.2% in the year to August, as opposed to a fall of 4.1% in the twelve months to July.

Bank lending and deposit rates

In August, the weighted average interest rate paid by resident MFIs on all outstanding deposits belonging to Maltese households and NFCs declined by 1 basis point to 1.41%. Meanwhile, the weighted average interest charged by resident MFIs on outstanding loans to resident households and NFCs remained unchanged at 4.30%.

The weighted average deposit rate remained unchanged when compared to a year earlier, while that charged on loans was 3 basis points lower.

Contribution to euro area monetary aggregates and counterparts

The contribution of resident MFIs to the euro area broad money stock expanded by €175.5 million, or 1.6%, in August, reaching €11.0 billion. Consequently, the annual growth rate accelerated to 8.9% from 7.0% one month earlier.

Developments in M3 stemmed primarily from a rise in the intermediate money component. The latter increased by €163.8 million, or 1.5%, on the previous month, while its annual growth rate accelerated to 8.9% from 7.1% in July.

Narrow money, grew by €134.2 million, or 2.1%, during the month because of increases in overnight deposits and currency issued. Overnight deposits expanded by €130.1 million, or 2.3%, driven mainly by higher balances belonging to NFCs and households. At the same time, currency issued rose by €4.1 million, or 0.5%. Consequently, the annual growth rate of M1 rose to 10.5% in August, from 8.6% in the previous month.

Deposits with an agreed maturity of up to two years, which also form part of M2, went up by €30.3 million, or 0.7%, following increased holdings by insurance companies and pension funds. On the other hand, deposits redeemable at up to three months' notice, fell by €0.8 million, or 0.7%.

Meanwhile, credit to general government rose by €62.0 million, or 1.6%, reflecting an increase in credit granted to Malta's general government. On the other hand, credit to other sectors fell by €147.6 million, or 1.3%, following a substantial decrease in MFI holdings of securities issued by non-bank financial institutions resident in other euro area countries. Loans granted to NFCs resident elsewhere in the euro area also declined during the month.

The external counterpart which reflects transactions between MFIs residing in Malta and residents of countries outside the euro area, fell by €424.7 million, or 3.9%. This reflected a significant increase in MFIs' deposit liabilities. Foreign claims also expanded, although to a lesser extent, reflecting higher MFI deposits placed with banks outside the euro area together with increased holdings of securities issued by non-euro area governments. Overall, the annual growth rate of the external counterpart slowed down to 4.1%, from 12.8% in July.

The "other counterparts" category, decreased by €685.8 million, or 4.6%, during the month following a decline in other liabilities (net). In turn, this mainly reflected transactions between banks resident in Malta and banks resident elsewhere in the euro area.

Similarly, longer-term financial liabilities dropped by €218.7 million, or 1.9%, due to a drop in the value of reserves arising from fluctuations in market valuations. At the same time, liabilities to the central government rose by €146.7 million, or 26.7%, due to an increase in government deposits that offset the previous month's decline.