Irish Property Market chat II - *read mod note post #1 before posting*

The Irish banks are under no pressure to raise rates. The excess money they have on deposit which they were giving 0.5% to the CB is now paying them 1.5%.

The rest they have on deposit is being lend out at rates of 2.5%ish on mortgage borrowing, 2-5% on commercial lending and 6-7% on personnel lending.

It only when they have competition on the deposit front they will come under pressure.

The CEO's of Ulster banks owner ( Nat west) and KBC Bank must be getting sick in their offices after leaving Ireland and all that cheap deposit money they left behind. There is 130 billion on deposit with Irish banks.

At present that is worth 15 billion per year to Irish banks

Was reading an interesting article. Sounds like investment funds have close to 5.6 trillion invested in assets in Ireland. Third highest in the world. Wonder how we will get along if **** hits the fan !

Sounds like the CBI are certainly looking at introducing a 50% leverage limit to be in line with other European countries. Found another article that suggest most borrow up to 70% in the residential sector, so with rising interest rates and a potential recession. Will be interesting to see how this plays out.

My understanding is nowadays banks pay well for short term bonds of 1-3 months that provide liquidity for equity which allow them to obtain lending from central banks. The draw for them will not be as strong as interest rates rise.

If KBC or Ulster had remained ( KBC especially as it's within the euro) they would have been well positioned to take advantage and to access deposits which they could have collateralised elsewhere in the EU maybe.

We are unlikely to see deposit above the ECB lending rate, but even rates of 1% seem unlikely unless the ECB rate pushed above 2.5-3% which is unlikely.

I think you will find the majority is 80% borrowed with the remaining 20% from investors. The majority of the property won’t be Irish property.

No chance….what you have across Europe is banks merging because unless your of a certain size it’s an uphill battle to make a return.

Add on top of that the reputation of the CBI being very difficult to deal with compared to other regulators and you would be mad to try and enter the Irish market….

at the end of the day the existing banks can’t find enough customers to lend to so a new entrant would need to massively cut margins to steal business.

Halifax and Anglo along with most banks were paying for deposits because they needed them to be able to continue lending to ever Tom dick and harry….

thats not correct the banks have to hold capital for RWA’s under CRDIV and need to hold enough liquidity to meet the liquidity coverage ratio.

Two examples would be:

A loan to a property developer (defined as an individual or company with more than 6 properties) would require to hold capital of 100% of the value of the loan. So if they lend 10 million the would need to set aside 10 million in capital.

A non operational deposit from a fund for example requires that 100% of the deposit must be available at any time. In other words you can’t fund any lending from it and is practically useless to a bank with the exception of charging transactional fees.

Let’s also not forget that interest rises generate higher levels of default which means more capital needs to be put aside…. Just look at the levels of provisions the UK banks have put aside at Q3.

A step yield curve is good for a bank but if it’s not run well it will also expose weaknesses.

The only reason there is excess deposits at the moment is due to QE where long term money was transformed to short term money. This is already changing and once liquidity dries up due to QT transforming short term money to long term money you will see this excess liquidity removed from the market and banks paying for deposits again.

Retail deposits or total banking deposits that are over inflated and is as useful a sat as GDP per capita.

??

And if they use the capital trapped in the Irish sub for lending elsewhere you get a better return on equity and happy shareholders…The return from the Central bank is the lowest return available. Yes it’s better than negative rates but when you take into account the cost of inflation to the bank you probably end up in a slightly better off or in a similar position to before. That is unless you don’t invest in technology and refuse to move with the times and end up loosing younger customers and future profits.

It’s a no brainier because you have fixed costs regardless of size due to regulation and IT costs so unless you have a big enough balance sheet you are better off deploying the capital elsewhere.

KBC had, and even still have, a branch network. They took on a number of former Halifax and NIB branches so they even have a few that look like proper old banks.

They stopped the rollout and then made a cut to what was there a few years ago, the rest are closing in March.

They still take cheques if you are still using the current account. Only time I ever used the branch was for that, not particularly long ago.

Don't know about cash, that might have been pulled already.

KBC continue to accept cheques lodged by personal customers.