Maltese deposits increased €206.2m in October
In October, deposits within M3 belonging to residents of Malta and held with resident Monetary Financial Institutions (MFIs) expanded by €206.2 million, or 2.2 per cent on the previous month. Consequently, the annual growth rate of these deposits accelerated to 7.8 per cent from 6.1 per cent one month earlier.
As in previous months, the rise in deposits stemmed primarily from an increase in overnight balances. The latter grew by €206.1 million, or 3.8 per cent, driven by higher balances belonging to all economic sectors, particularly non-bank financial intermediaries, non-financial companies (NFCs) and households. In part, this rise reflects the redemption of two Malta Government Stock (MGS) issues that occurred during the month.
Deposits with an agreed maturity of up to two years rose marginally by €1.9 million, or 0.1 per cent, as an increase in private NFCs’ holdings was partly offset by lower balances held by insurance companies and pension funds. In contrast, deposits redeemable at a notice of up to three months fell by €1.7 million, or 1.5 per cent, as households’ balances declined.
In October, credit granted by resident MFIs to residents of Malta contracted by €74.8 million, or 0.7 per cent, on the previous month. Year-on-year, however, credit expanded by €0.2 billion or 1.8 per cent.
Over the month, credit to general government fell by €62.2 million, or 2.3 per cent, as an increase in the banks’ Treasury bill holdings was offset by a fall in their MGS portfolio in line with the redemption of two MGS issues, as mentioned above. In annual terms, credit to general government rose by 9.8 per cent.
Meanwhile, credit to other sectors, mainly comprising households and private sector NFCs, contracted by €12.6 million, or 0.1 per cent, during the month of October. While loans granted to households, primarily for house purchases, increased, loans granted to NFCs – mostly those operating in the manufacturing, transportation and storage and construction sectors – declined. On an annual basis, credit to the other sectors contracted by 0.4 per cent.
With regard to net foreign assets belonging to resident banks, these fell by €1.8 billion, or 15.1 per cent, on the previous month as a substantial decline in foreign claims exceeded a fall in foreign liabilities. The large movements in foreign assets and liabilities seen in October mainly reflected cross-border transactions of international banks that operate from Malta.
The decline in foreign assets mostly reflected a reduction in loans granted to foreign banks. On the other hand, the drop in liabilities arose mainly from a lower amount of non-residents’ deposits held with resident MFIs. On an annual basis, net foreign assets contracted by 18.9 per cent as opposed to a 3.9 per cent drop in September.
In October, the weighted average interest rate paid by MFIs on all deposits belonging to resident households and NFCs remained unchanged at 1.41 per cent for the third consecutive month. Meanwhile, the interest rate charged by resident MFIs on outstanding loans to Maltese households and NFCs fell by 1 basis point to 4.29 per cent.
The weighted average deposit rate was one basis point below that offered a year earlier, while that charged on loans was two basis points lower.
The contribution of resident MFIs to the euro area broad money stock (M3) expanded by €283 million, or 2.6 per cent, in October reaching €11.3 billion. As a result, the annual growth rate went up to 10.5 per cent from 8.3 per cent in the previous month.
Developments in M3 stemmed from a rise in the intermediate money (M2) component, which increased by €302.3 million, or 2.8 per cent. Consequently, the annual growth rate of M2 rose to 10.5 per cent from 8.3 per cent in September.
Narrow money (M1), which is a major component of M2, grew by €210.6 million, or 3.3 per cent, during the month, reflecting an increase in both overnight deposits and currency issued. The former expanded by €209.4 million, or 3.7 per cent, driven mainly by higher balances belonging to residents as mentioned earlier. At the same time, currency issued rose by €1.2 million, or 0.2 per cent. As a result, the annual growth rate of M1 accelerated to 13.8 per cent from 9.8 per cent in the previous month.
Deposits with an agreed maturity of up to two years, which also form part of M2, rose by €93.4 million, or 2.2 per cent, during the month, mainly on the back of higher balances belonging to private NFCs. On the other hand, deposits redeemable at up to three months’ notice, the remaining component of M2, fell by €1.7 million, or 1.5 per cent.
Turning to the counterparts of M3, credit to euro area residents expanded by €111.2 million, or 0.7 per cent, over the month of October. The rise stemmed entirely from credit granted to residents other than general government, which increased by €194.2 million, or 1.8 per cent. In turn, this was mainly due to a rise in banks’ holdings of securities issued by non-bank financial intermediaries resident in other euro area countries. On the other hand, credit to general government contracted by €83.0 million, or two per cent, following a decline in MFI holdings of government securities. Overall, credit contracted at a slower year-on-year rate, falling by 4.1 per cent in October as opposed to a 6.5 per cent drop in September.
The external counterpart of M3, which reflects transactions between MFIs residing in Malta and residents of countries outside the euro area, contracted by €1.4 billion, or 11.6 per cent. This reflected a substantial decline in foreign assets that stemmed from a fall in loans extended mainly to other banks outside the euro area. To a lesser extent, foreign liabilities also decreased, driven by a fall in repurchase agreements. On a year-on-year basis the external counterpart continued to expand, but the rate of growth decelerated to 14 per cent, from 39.1 per cent in September.
The “other counterparts” category, which is negatively related to M3, decreased by €1.6 billion, or 9.9 per cent, during the month. This mainly reflected a decline in longer-term financial liabilities that was principally brought about by a drop in shares and other equity on the part of one internationally-oriented bank. At the same time, MFI liabilities to the central government fell by €119.6 million as the redemption of MGS that occurred during the month led to a reduction in government deposits with the banking system. On the other hand, other liabilities (net) rose by €183.2 million, or 5.2 per cent. In turn, this mainly reflected transactions between banks resident in Malta and banks resident elsewhere in the euro area.