Download Macro Financial Review Press Briefing - Dublin

Macro-Financial Review H1 2016
14 June 2016
Key Messages
•
External Risks remain elevated and have increased since the last
Macro-Financial Review
•
A Brexit would have short term and long-term effects for Ireland
•
Domestic output continues to grow strongly
•
High indebtedness across private and public sectors leave the
economy vulnerable to higher interest rates and/or economic
shocks
•
In the banking sector, the workout of impaired loans and the
disposal of NPLs is ongoing. Domestic banks have returned to
profitability but it remains weak and varies at individual bank level
•
Domestic non-life insurance sector face difficult operating
conditions with high-impact firms reporting underwriting losses in
2015
2
• External economic and financial outlook has deteriorated. Domestic growth remains
strong.
Composition of Irish GDP growth
Real GDP growth (global) forecasts, 2016-2017
per cent
per cent
per cent
per cent
15
15
10
10
5
5
1.5
0
0
1.0
1.0
-5
-5
0.5
0.5
-10
-10
0.0
-15
3.0
3.0
2.5
2.5
2.0
2.0
1.5
0.0
WEO Oct 15 WEO Apr 16 WEO Oct 15 WEO Apr 16
2016
2017
euro area
UK
US
Source: IMF World Economic Outlook (WEO) Database.
-15
07
09
11
13
15
17f
Government expenditure
Personal consumption
Capital formation
Net exports
GDP growth rate (rhs)
Source: CSO and Central Bank of Ireland.
Notes: 2016 and 2017 are forecasts from the Central Bank’s
Quarterly Bulletin No. 2 2016.
3
• Corporate and household indebtedness remain high. Leaving economy vulnerable to
economic shocks.
Private sector debt, consolidated, % of GDP
per cent
per cent
300
300
250
250
200
200
150
150
Household debt to gross household disposable
income – European comparison
per cent
per cent
300
300
250
250
200
200
150
150
100
100
100
50
50
50
50
0
0
0
0
05
06
07
08
09
10
11
12
13
14
15
Private sector
Households
NFC (foreign parent)
NFC (Irish parent)
Source: CSO & Central Bank of Ireland.
Romania
Slovenia
Croatia
Czech Republic
Italy
Germany
Austria
France
Greece
Belgium
Spain
Finland
Portugal
United Kingdom
Ireland
Sweden
Netherlands
Denmark
100
Source: ECB, CSO and CBI.
Notes: Debt is defined as loans. Data as at 2015Q4 except for
disposable income for Denmark for which 2014Q4 is the latest
available.
4
• House price increases and expectations have moderated. Housing supply remains too
low.
Residential property price growth: National, Dublin
& non-Dublin
year-on-year change
per cent
year-on-year change
per cent
30
30
25
25
20
Stock listed for sale or rent on Daft.ie
number of units
number of units
70,000
10,500
20
60,000
9,000
15
10
15
10
50,000
7,500
5
5
40,000
6,000
0
0
-5
-5
30,000
4,500
20,000
3,000
10,000
1,500
-10
-10
-15
-15
-20
-20
-25
-25
-30
-30
06
07
08
National
Source: CSO.
09
10
11
12
13
14
National excluding Dublin
15 16Apr
Dublin
0
0
07
08
09
10
11
Nat'l stock for sale (lhs)
Dublin stock for sale (rhs)
12
13
14
15 16May
Nat'l stock for rent (lhs)
Dublin stock for rent (rhs)
Source: Daft.ie.
5
• Commercial real estate prices increasing at a high rate. Demand driven by foreign
investment.
Breakdown of commercial property capital and rental
value growth by sector
year-on-year change
per cent
year-on-year change
per cent
Sources of Irish commercial property investment
expenditure
€ billions
number of deals
5.0
250
4.5
225
4.0
200
3.5
175
3.0
150
2.5
125
2.0
100
1.5
75
5
1.0
50
0
0
0.5
25
-5
-5
0.0
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
-10
-10
14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1
Retail (capital)
Office (capital)
Industrial (capital)
Source: MSCI/IPD.
Retail (rental)
Office (rental)
Industrial (rental)
0
06
07 08 09 10 11
Pre-2011 investment
Private
REIT
No. of transactions (rhs)
12
13 14 15 16Q1
Other
Property co.
Institution/fund
Source: CBRE Research.
Notes: Investment spending relates to individual transactions
worth at least €1 million. Breakdown by the original source of
funding is only available from 2011.
6
•
Non-performing loans continue to decline, but remain high. Higher net interest
margins driven by funding costs ,rather than interest income.
Domestic banks’ non-performing loans as
a share of loans to sector
per cent
per cent
Domestic banks’ net-interest margins
per cent
per cent
70
70
6
6
60
60
5
5
50
50
4
4
40
40
3
3
30
30
2
2
20
20
1
1
10
10
0
0
0
11
Q3
CRE
12
Q3
13
Q3
14
SME & corporate
Q3
15
Q3
16
Mortgages
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Net-interest margin (lhs)
Interest expense/assets (rhs)
Interest income/assets (rhs)
Source: Central Bank of Ireland.
Notes: Data are consolidated and represent impairment rates for each sector.
Source: SNL Financial and Central Bank of Ireland calculations.
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Conjuctural
assessment
Impact on procyclicality
ConjuncturalBank credit & house prices
assessment
Credit/housing
market
developments Side effects
Housing supply, unsecured
lending & rents
Credit/housing market
Banking
sector
developments
resilience
Changes in lending
practises &
resilience
The
Review
Household
resilience
Impact
on inproSide effects
Changes
borrower
characteristics &
cyclicality
resilience to shocks
Housing supply,
Bank credit &
unsecured
house prices
lending & rents
Banking Sector
resilience
Changes in lending
practices & resilience
15 June
10 August
End November
Open public
submissions
via website
Close public
submissions
Publication of
Review
Outcome
Central Bank accepting evidence-based submissions: 15 June 2016 – 10 August 2016
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