Strategic Banking Corporation of Ireland. SFA Business bytes, Cork May 2016

Transcription

1 Strategic Banking Corporation of Ireland SFA Business bytes, Cork May

2 SBCI Key Objectives Reinforce Ireland s economic recovery by improving funding and access to finance mechanisms for the economy Financial Greater volume of Funding Reduction in interest costs New options for Risk Sharing - Improve access to Finance Targeted measures to address specific market failures Flexible platform to access support from Europe Competition Greater diversity of Finance offerings Encourage New Market Participants Assist with the growth of smaller credit providers Create a new arena for competition in the use of SBCI Funds

3 SME Business Environment - Challenges Premium in the cost of finance to SMEs v Large Companies Premium in the cost of finance to SMEs v EU SMEs Low level of competition amongst both bank and non-bank providers of finance. The limited variety or types of finance available to SMEs. The barriers for certain SMEs to access finance. Irish loan rejection rates remain the second highest across EA. Low investment risk appetite amongst SMEs made worse by poor financing market conditions and low levels of SME equity. 3

4 SME Business Environment Progress in 2015 New lending flows increased to SMEs in nearly every sector of the economy Decline rates fell from March to Sept Application turnaround time has decreased SME perceptions of banks willingness to lend has improved Banks were likelier to approve applications for expansion purposes rather than for working capital. SBCI lending beginning to positively impact interest rates charged to Irish SMEs. 4

5 SME Business Environment - Financials SME sector deleveraging since 2010 Level of indebtedness down by 23bn - 10bn of which was property related New Lending bn s since Net Deleveraging -20 Total of new SME lending in bn (10% increase on 2014) Lending flows improving with 3.4bn approved for SMEs in 2015 (24% increase on 2014) Repayments -50 Source: {CBI} 5

6 SBCI Phased Market Entry Phase 1 Long Term Liquidity On-Lent by Banks to SMEs million committed to 3 Bank On-Lenders Phase 2 Long Term Liquidity On-Lent by Non-Banks to SMEs - 75 million committed to 2 Non-Bank On-Lenders - 2 further Non Bank On- Lenders approved - Further pipeline under assessment Phase 3 Risk Sharing Products - Narrower Focused Measures - SBCI provides a risk share / guarantee - To work in conjunction with Credit Guarantee Scheme. 6

7 Phase 1: Long Term Liquidity On Lent by Banks to SMEs On-Lenders Launched AIB March 2015 December m 200m BOI March m Ulster Bank January m Total 675m These banks provide 90%+ coverage of the Irish SME market between them making SBSI finance widely available.

8 Phase 2: Long Term Liquidity to Non Banks On-Lenders On-Lenders Launched Finance Ireland November m Merrion Fleet December m Sub Total 76m On-Lender Pipeline 2016 Agri Machinery Financing April m Invoice Discounting May m Plant and Equipment 70m Term Lenders and others 400m Sub Total 555m The key value added to date has been the introduction of two new specialist lenders to the Irish market.

9 SBCI On Lending to date Dec

10 SBCI Impact Overall Interest Rates bps Interest rate on NFC loans <250K, 3m average Interest rate on NFC loans > 250K, < 1m 3m average EU2 Ireland SBCI EU2 Ireland SBCI Source: CBI / SBCI 4,619 SBCI funded loans drawn Average rate on loans < (1.54% lower than market rates) Average rate on loans > 250k < in line with market rates Average rate on loans > 1m 3.9% 10

11 SBCI Impact Sectoral Market Share of New Lending and Key Sectoral Interest rate SBCI s top five sectors 2015 SBCI interest rate in top five sectors % % 6.7% 5.6% 4.4% Hotels & Rest. Other Bus. Services Agri Health Retail 2.0 Hotels & Rest. Other Bus. Services Agri Health Retail Source: CBI /SBCI SBCI % Market Share SBCI Saving vs. Market SBCI has facilitated lending of 172m in Two-thirds of this lending occurred in five sectors of the economy. 7% of overall new lending in 2015 was supported by SBCI (9% if exclude Q1). The interest rate charged on this lending was lower than market rates. 11

12 SBCI Impact Growth and Employment Profile of SBCI lending v Market SME employment Current market figures exceed 100% as firms may respond with multiple answers to survey 48% 53% 92% 20% ,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, ,000 6% 2% Inventory/ Working capital Investment Other reasons Current market SBCI investments SBCI bn investment 2015 Employment change 2015 Q1-Q4 (RHS) Source: CSO SME employment increased for the first time since the crisis in 2015{ Source CSO } SBCI s lending to SMEs supported 17,000 jobs in The top five sectors to which SBCI has lent have seen net employment growth in the region of 16,500 jobs, from end-q to end Q (seasonally adjusted). { Source CSO } Source: ECB & SBCI 12

13 Risk Sharing SME credit conditions in Ireland remain constrained Types of financing source preferred by SMEs Rejection rates of bank loan Italy Ireland 73% 66% 12% 4% 15% 8% 30% 25% 20% EU28 61% 17% 9% 15% UK 57% 14% 9% 10% Bank Loan Loan - Other Source 5% Equity Don't Know Other Financing 0% NL Ireland Italy Germany UK Similar to other EA peers, Irish SMEs financing relies heavily on loans. However, rejection rates of bank loan applications of SMEs still ranked second highest across EA. {ECB /SAFE survey}

14 Phase 3: Risk Sharing - Capacity, Capability and Delivery Development of a Risk Sharing Capacity and Capability new activity to the Irish Market Accessing risk capital through co-ordination of approach with current Irish Credit Guarantee Scheme and from European schemes COSME, Innovfin, EFSI, ESIF Creation of a common platform and related Channels to Market Moving to a model for deploying credit risk related measures coordinated through one platform, allows for a number of advantages: Economies of Scale No requirement for multiple government department/agencies to manage delivery of the measure Development of a Centre of Expertise Creates greater flexibility to both build a financial architecture and adapt measures to meet identified market needs The agility to react and deliver on a timely basis. A central function focused on ensuring the most benefit is obtained from EU resources by combining programs into single measures. This is a common model across the EU.

15 John Madigan Tel: John.madigan@sbci.gov.ie