UK banks to buy Irish banks following Brexi?

daheff

So a thought struck me...UK banks need to have access to the European market following Brexit.

UK Banks may find it easier to buy a cheap Irish (or other EU) bank to keep their European access (passporting rights).

I just read on Bloomberg that it is likely to cost £50K per employee to move staff abroad. 10K staff =cost of approx 500m GBP

Boi Market cap is circa 6.5bn, PTSB is 1bn EUR

Maybe theres something in this for a UK bank? What do you think?


http://www.bloomberg.com/news/articles/2016-07-25/banks-face-brexit-bill-of-66-000-per-u-k-employee-moved-abroad


as a way of disclosure I am a shareholder in both BoI & PTSB.

Rainmann

Could the UK banks not just set up a small operation within say Ireland and then pile their EU revenues through us?

newacc2015

Rainmann wrote: »

Could the UK banks not just set up a small operation within say Ireland and then pile their EU revenues through us?

Getting a banking license is long and difficult. It would make more sense to merge with a bank like BOI or PTSB. BOI is probably one of the few medium sized Eurozone banks with a somewhat healthy loan sheet

A UK could technically set up a bank anywhere in the EU and lend from it.

OttoPilot

Well RBS already has Ulster. Hopefully the govt can flog off AIB!

daheff

OttoPilot wrote: »

Well RBS already has Ulster. Hopefully the govt can flog off AIB!

RBS also owns (currently) ABN AMRO in Netherlands too.

KingBrian2

I hear Barclays is a well run Bank I do hope we get banks improving the banking sector here in Ireland. AIB, BOI, Ulster Bank, EBS and Permanent TSB have been run down due to the crash years so bring in the new banks I say.

newacc2015

KingBrian2 wrote: »

I hear Barclays is a well run Bank I do hope we get banks improving the banking sector here in Ireland. AIB, BOI, Ulster Bank, EBS and Permanent TSB have been run down due to the crash years so bring in the new banks I say.

No one can answer why there is no new banks wanting to enter Ireland. We have some of the lowest, if not the lowest interest rates on deposits in Europe. But we have some of the highest interest rates in Europe on mortgage. There are mortgage holders in basket case economies in Eastern Europe getting cheaper mortgages than Ireland

You can see loans on Mintos, where subprime Czech borrowers can get mortgages with an interest rate of 5.5%. Prime mortgages lenders in Ireland are often not far off that

Amirani

daheff wrote: »

RBS also owns (currently) ABN AMRO in Netherlands too.

Nope, ABN AMRO is state owned. RBS own a legacy portion of the former ABN entity which is now called Royal Bank of Scotland NV.

In response to the OP, many UK banks already have European subsidiaries - HSBC France, Ulster Bank, Barclays Bank Ireland. Passporting financial services is much more complex than just owning a subsidiary within a relevant jurisdiction. The subsidiaries would be seprerately regulated and have to adhere to regulatory requirements on a standalone basis.

Most banking groups at the moment are downsizing and building capital rather than growing and spending it due to regulations. Add in the fact that Irish banks have fairly terrible NPLs, low levels of collateral redemption and a political system that is trying to cap mortgage rates for populist reasons - becomes not such a great investment.

Amirani

newacc2015 wrote: »

No one can answer why there is no new banks wanting to enter Ireland. We have some of the lowest, if not the lowest interest rates on deposits in Europe. But we have some of the highest interest rates in Europe on mortgage. There are mortgage holders in basket case economies in Eastern Europe getting cheaper mortgages than Ireland

Acquisition and expansion just isn't happening in the banking sector in general, not just in Ireland.

Deposit interest rates in Ireland are pretty much in line with Western Europe, and higher than Nordics. Loan rates are high, but a big part of that is how much harder it is to exercise collateral in Ireland.

newacc2015

Amirani wrote: »

Acquisition and expansion just isn't happening in the banking sector in general, not just in Ireland.

Deposit interest rates in Ireland are pretty much in line with Western Europe, and higher than Nordics. Loan rates are high, but a big part of that is how much harder it is to exercise collateral in Ireland.

According to an IT article on deposits based on an ECB report. Irish consumers are getting the lowest deposit rates of any Eurozone country. Nordics are not the Eurozone and are not in anyway comparable to Ireland in the slightest ie they are using negative interest rates to stop speculators parking money in the countries hoping the pegs break.How the negative interest rate of those countries comparable to Ireland?

http://www.irishtimes.com/business/personal-finance/rabodirect-and-kbc-bank-to-cut-deposit-rates-further-1.2658896

Regardless of the difficulty exercising collateral, it is extremely hard to justify that the margins on Irish mortgages need to be on par with Romania and Latvia.

Look at BTL, if you fail to pay your BTL mortgage for about 3 months. It will be put into 'receivership' aka repossessed and pawned off almost immediately. Do the banks really need an almost 4% and often significantly higher margins to be compensated for the 'risk'? No as there is little risk in BTL if the LTV if a decent ratio

Amirani

newacc2015 wrote: »

According to an IT article on deposits based on an ECB report. Irish consumers are getting the lowest deposit rates of any Eurozone country. Nordics are not the Eurozone and are not in anyway comparable to Ireland in the slightest ie they are using negative interest rates to stop speculators parking money in the countries hoping the pegs break.How the negative interest rate of those countries comparable to Ireland?

Firstly, you mentioned Europe, not Eurozone, so perfectly reasonable to point out Nordics as being lower.

Second, the interest rates are absolutely comparable as the deposit rates being charged by respective central banks in both jurisdictions are both negative. ECB charge 40bps on deposits placed with then. Irish banks are currently awash with liquidity and don't need any more deposits (most have started rejecting new corporate deposits). Just look at the NIMs that Irish banks have, they're not earning crazy margins compared to Eurozone peers.

Not sure what the Irish Times are basing their claim on, I have the ECB data on front of me and Irish rates are pretty much in line with Spain etc. They may be comparing to the likes of Netherlands which don't actually have a high usage of deposit accounts like here, rather use lots of fund-type savings products.

Regardless of the difficulty exercising collateral, it is extremely hard to justify that the margins on Irish mortgages need to be on par with Romania and Latvia.

What to do mean "regardless of the difficulty", you can't just disregard perhaps the single most important credit factor in a lending decision. Bank RAROC calculations will use this probability of successful collateral redemption in determining interest rates. This has been citied extensively by the CBI and the ECB (along with high levels of trackers and NPLs as reasons behind the higher interest rates being charged in Ireland).

newacc2015

Amirani wrote: »

Firstly, you mentioned Europe, not Eurozone, so perfectly reasonable to point out Nordics as being lower.

Second, the interest rates are absolutely comparable as the deposit rates being charged by respective central banks in both jurisdictions are both negative. ECB charge 40bps on deposits placed with then. Irish banks are currently awash with liquidity and don't need any more deposits (most have started rejecting new corporate deposits). Just look at the NIMs that Irish banks have, they're not earning crazy margins compared to Eurozone peers.

Not sure what the Irish Times are basing their claim on, I have the ECB data on front of me and Irish rates are pretty much in line with Spain etc. They may be comparing to the likes of Netherlands which don't actually have a high usage of deposit accounts like here, rather use lots of fund-type savings products.



What to do mean "regardless of the difficulty", you can't just disregard perhaps the single most important credit factor in a lending decision. Bank RAROC calculations will use this probability of successful collateral redemption in determining interest rates. This has been citied extensively by the CBI and the ECB (along with high levels of trackers and NPLs as reasons behind the higher interest rates being charged in Ireland).

Reasonable yes, but I dont see how they are relevant at all to this discussion. The objectives of Nordic countries are not in anyway similar to the objectives of Eurozone Economies

Whether or not if they are the lowest. Irish banks are still able to get deposits extremely cheaply. Is that being passed onto mortgages and other credit products like car loans, business loans, overdrafts etc not all. In fact I know people who had credit cards that had an APR of 10% in 2007, when mortgages were about 5-6% APR. Their credit cards are now 16.8% APR and mortgages are close to 3%. I know CC are unsecured and more risky. But an almost 14% risk premium over a mortgage?

Your post is interesting, but you still havent explained why an Irish bank is charing 4.8% plus for a BTL mortgage with easy recovery of the asset in the case of default. Explain to me how a margin of 4.4% is justified on the mortgage ? You basically ignored it in my last point. I know residential mortgages are more difficult to repossess. But how is a mortgage with easy recovery of debt still charging 4.8%?