Deposits by Maltese residents increase €134.5m
In November, deposits belonging to residents of Malta and held with resident Monetary Financial Institutions (MFIs) expanded by €134.5 million, or 1.4 per cent. As a result, the annual growth rate rose to 9.6 per cent, from 7.8 per cent in the previous month.
Growth in deposits stemmed mainly from a rise in overnight deposits, which put on €101.1 million, or 1.8 per cent. This was driven, to a large extent, by higher balances belonging to private non-financial corporations (NFCs) and households, which together offset a fall in balances belonging to non-bank financial intermediaries.
Consequently, overnight deposits grew at a faster annual pace in November with the rate reaching 17.2 per cent, from 15 per cent in October.
Deposits with an agreed maturity of up to two years also expanded, rising by €33.2 million, or 0.9 per cent, on the previous month mostly due to higher balances belonging to insurance companies and, to a lesser extent, private NFCs and households. As a result, the annual growth rate of these deposits turned positive, standing at 0.9 per cent in November, from -0.7 per cent in October. At the same time, deposits redeemable at a notice of up to three months edged up by €0.2 million, or 0.2 per cent, over the month.
Credit extended to Maltese residents
In November, credit granted by resident MFIs to residents of Malta contracted by €24.1 million, or 0.2 per cent, following a decline in credit granted to general government.
The annual growth rate slowed down to 1.1 per cent in November, from 1.8 per cent in October.
Credit to general government fell by €32 million, following a drop in banks’ Treasury bill holdings that outweighed an increase in their portfolios of Malta Government Stocks. The latter partly reflected the primary market issue of stocks during the month. As a result, the annual growth rate of credit to general government slowed down to 7.2 per cent from 9.8 per cent in the previous month.
On the other hand, credit to residents outside the general government sector rose by €7.9 million, or 0.1 per cent. This increase stemmed almost entirely from a rise in loans granted to households, particularly those for house purchases. In contrast, credit to NFCs declined slightly, mainly due to a fall in loans granted to the construction sector. Overall, the increase in credit during the month was smaller than that registered twelve months earlier. Consequently, the annual growth rate fell to -0.6 per cent in November from -0.4 per cent in October.
Net foreign assets of Maltese MFIs
Net foreign assets belonging to resident MFIs contracted by €24.7 million, or 0.3 per cent, as a substantial drop in foreign assets exceeded a fall in corresponding liabilities. The fall in external assets stemmed primarily from a decline in securities’ holdings, coupled with a reduction in lending to foreigners. On the other hand, the decline in liabilities mainly reflected lower borrowing from foreign banks, though non-residents’ deposits with resident banks also fell. Consequently, on an annual basis net foreign assets contracted by 20.1 per cent in the year to November, as opposed to a fall of 18.9 per cent in the twelve months to October.
Bank lending and deposit rates
In November, the weighted average interest rate paid by MFIs on all deposits belonging to resident households and NFCs fell by one basis point to 1.40 per cent. Meanwhile, the weighted average interest charged by resident MFIs on outstanding loans to resident households and NFCs fell by 4 basis points to 4.25 per cent.
The weighted average deposit rate was two basis points lower when compared to a year earlier, while that charged on loans was 8 basis points lower.
Contribution to euro area monetary aggregates
The contribution of resident MFIs to the euro area broad money stock (M3) expanded by €75.2 million, or 0.7 per cent in November, reaching €11.4 billion. Consequently, its annual growth rate accelerated to 11.3 per cent, from 10.5 per cent one month earlier.
Movements in M3 in November were entirely driven by developments in the intermediate money (M2) component. The latter increased by €118.2 million, or 1.1 per cent, on the previous month. In contrast, net holdings of marketable instruments, which also form part of M3, fell by €43 million, or 21.2 per cent, during the month.
Narrow money (M1), which forms part of M2, grew by €96.2 million, or 1.4 per cent, during the month because of increases in overnight deposits and currency issued. Overnight deposits expanded by €95.6 million, or 1.6 per cent, driven by higher balances belonging to residents of Malta. At the same time, currency issued rose marginally. Consequently, the annual growth rate of M1 rose to 15.5 per cent in November, from 13.8 per cent in the previous month.
Deposits with an agreed maturity of up to two years, which also form part of M2, went up by €21.7 million driven also by higher balances belonging to residents. Deposits redeemable at up to three months’ notice, the remaining component of M2, edged up slightly.
Turning to the counterparts of M3, credit to euro area residents contracted by €473.6 million, or 3.1 per cent, on the back of lower credit granted to both general government and other sectors. Consequently, credit contracted at a faster pace, falling by 7.6 per cent on a year-on-year basis in November, following a 4.1 per cent drop in October.
Credit to general government contracted by €163.1 million, or 4.1 per cent, in November mirroring a decline in holdings of euro area government securities. At the same time, credit to other sectors fell by €310.5 million, or 2.8 per cent. The decline stemmed entirely from a fall in credit granted to residents in euro area countries other than Malta that was mainly due to lower holdings of securities issued by non-bank financial intermediaries. In addition, one internationally-oriented bank significantly reduced its lending to NFCs.
The external counterpart of M3, which reflects transactions between MFIs residing in Malta and residents of countries outside the euro area, fell by €1.5 billion, or 14.4 per cent. This is the result of a significant decline in external claims stemming mainly from a fall in securities’ holdings. This was coupled with a fall in deposits held with other MFIs as well as lower loans. Foreign liabilities also contracted, although to a lesser extent, reflecting lower deposits held with resident MFIs and a decline in repurchase agreements. Overall, the external counterpart contracted by 4.6 per cent in the year to November, whereas it had increased by 14.0 per cent in the year to October. Large movements in the external counterpart mainly reflected cross-border transactions of international banks that operate from Malta.
The “other counterparts” category, which is negatively related to M3, fell by €2.1 billion, or 14.5 per cent, during the month reflecting mainly a decline in other liabilities (net).
In turn, this mainly reflected a drop in resident banks’ liabilities to banks resident elsewhere in the euro area. At the same time, longer-term financial liabilities dropped by €130.5 million, or 1.3 per cent, due to a drop in the value of reserves arising from fluctuations in market prices and exchange rate movements. Meanwhile, liabilities to the central government fell by €15 million, or 2.6 per cent, as government deposits declined.