The contribution of resident monetary and financial institutions (MFIs) to the euro area broad money stock (M3) rose by €44.8 million, or 0.5 per cent, in May, to €9.4 billion, the Central Bank said. The annual growth rate increased to 3.9 per cent from 2.5 per cent in April.
The narrow money component (M1) fell by €69.8 million, on account of a decrease of €74.3 million in overnight deposits. At the same time, the annual growth rate fell to 10.0 per cent in May from 13.2 per cent in April.
Notwithstanding the month's fall in M1, the intermediate money component (M2) went up by €45.1 million, or 0.5 per cent.
This expansion was propelled by a rise of €114.8 million in deposits with an agreed maturity of up to two years, while deposits redeemable at notice up to three months remained stable around their April level. Meanwhile, the year-on-year growth rate of M2 increased to four per cent from 2.6 per cent a month earlier.
Turning to the counterparts of M3, credit expanded by €158.7 million, or 1.1 per cent, during the month under review.
This increase was spurred by credit to residents outside the general government sector, although credit to the latter also rose.
On an annual basis, credit growth decelerated further, in line with the trend observed since the beginning of 2009, dropping to 2.9 per cent from 4.3 per cent in April.
The external counterpart of M3, which reflects transactions between MFIs residing in Malta and non-euro area residents, declined by €309.8 million, or 4.1 per cent in May.
An increase in liabilities to non-euro area residents, which reflected a significant rise in repurchase agreements, exceeded the rise in claims on residents of countries outside the euro area, mainly in the form of higher MFI deposits held abroad.
The other counterparts of M3 fell by €195.9 million, or 1.5 per cent, in May. This was propelled by a reduction in other liabilities (net), which mainly involve transactions with other euro area banks.
Other liabilities (net) dropped mainly due to a fall in interbank time deposits held with banks in Malta that outweighed a contraction in Maltese banks' deposits held with other euro area banks and in loans extended to them.
Transactions with Maltese residents: deposits and credit
Total deposits held by residents of Malta with Maltese MFIs fell by €91.8 million, or 1.1 per cent in May.
This was mainly attributable to a decrease in overnight deposits.
Deposits with an agreed maturity up to two years also contributed, albeit to a much lesser extent.
Meanwhile, the year-on-year growth rate of total deposits remained unchanged at 2.2 per cent.
Overnight deposits decreased by €87.8 million, or two per cent in May. The month's drop was mainly driven by a fall in deposits held by private and public non-financial companies (NFCs), although deposits belonging to households were also lower.
At the same time, deposits with an agreed maturity of up to two years dropped by €4.1 million, or 0.1 per cent.
Credit issued by resident MFIs to residents of Malta (including government) rose by €121.9 million, or 1.2 per cent, in May. An expansion in credit to general government explains most of this increase, as credit to other residents increased moderately. On a year earlier, total credit growth continued to decelerate, easing to 3.5 per cent in May from 3.8 per cent in April.
Credit provided to the Maltese general government went up by €83.9 million, or 3.9 per cent, in May. This increase stemmed primarily from a rise in banks' holdings of Maltese government bonds which completely outweighed the fall in their holdings of Treasury bills. The annual growth rate decelerated to 2.5 per cent from 4.4 per cent in April.
Credit to residents other than general government increased by €38 million, or 0.5 per cent, during May. This mainly reflected a rise in lending to private NFCs, particularly firms in the wholesale and retail trade sector, and to households for house purchases; there was also a partially offsetting fall in lending to public NFCs. The annual growth rate rose by 0.1 percentage points on a month earlier, to 3.8 per cent.
Net foreign assets of Maltese MFIs
Net holdings of foreign assets by resident MFIs were down by £114.6 million, or one per cent during the month reviewed. The fall reflected an increase in the banks' external liabilities which outweighed the rise in their foreign assets. The annual growth of net foreign assets fell to 9.8 per cent in May from 10.1 per cent in April.
Bank lending and deposit rates
In May, the weighted average interest rate paid on deposits included in M3 remained unchanged compared to a month earlier, at 1.12 per cent, while that charged on loans edged down to 4.75 per cent from 4.77 per cent, in April. Compared to a year earlier, the deposit rate fell by eight basis points, while that charged on loans rose by 29 basis points.