A profile of non-performing Irish SME loans

11.1 per cent of Irish SME balances at three major Irish retail banks were non-performing in December 2018. I use loan-level data to examine the characteristics of these balances, investigate why the ratio remains so high, and identify the drivers of recent progress in its reduction. I show that the overall gure of 11.1 per cent masks a lot of important detail. 3.9 per cent of Irish SME balances are non-performing under supervisory denitions, but are not in arrears. 4.5 per cent of balances have been in arrears for more than two years and some loans have been in arrears for up to ten years. The NPL ratio of 11.1 per cent in December 2018 is down substantially from 17.5 per cent in June 2018. Loan cures are an important explanation for this decrease – 18.8 per cent of non-performing balances became performing between June and December 2018. The majority of these balances relate to loans that were not in arrears. 19.9 per cent of non-performing balances exited the portfolio over the same period, with the vast majority of these balances being in arrears. Aggregate supervisory data suggest that the Irish SME NPL ratio continued to fall in the rst half of 2019.