A bad year for the banking sector

THERE is no doubt that 2021 has been a very bad year for the Irish banking sector and, as a result, the Irish public.

Bank of Ireland has already announced the closure of 88 branches, two in West Cork, and Ulster Bank will close its Bandon branch following its decision to pull out of Ireland on a phased basis.

On top of that, we had the news that PTSB is to close cash desks at 44 branches nationwide, including a number in West Cork. And now – the latest blow – is that KBC is in talks to sell off its performing mortgages to Bank of Ireland.

Observers believe this is the beginning of the end of KBC’s presence in the Irish market.

Some KBC mortgage holders got an inkling that all was not well when the name ‘Phoenix 7’appeared on their bank statements recently, instead of the usual KBC notation.

When contacted, KBC insisted this was an ‘error’ in the statements and that it had not sold the mortgages, but had ‘securitised’ them –  meaning they were hived off into a separate entity, albeit still under the auspices of KBC.

But when it emerged this week that some of its performing mortgage loans may be sold to Bank of Ireland, and the poorly performing ones to another third party, the reorganising of KBC’s loans all started to make sense.

If KBC leaves the market, it will be following in the footsteps of several others gone before it, including Anglo, ACC/Rabobank (remember them?), Bank of Scotland and Danske.

That will leave just AIB and Bank of Ireland in what is termed the ‘pillar bank’ sector.

That is not good news for customers, or anyone seeking a mortgage in the next few years.

Despite Ireland having one of the highest rates of home ownership in Europe, (although that fell from 80% to 71% between 1991 and 2018), the banking sector does not seem to see Ireland as a ‘good bet’ for banking, especially in the home loan corner.

The Ulster Bank said that a review it had undertaken showed that it would not be able to generate sustainable long-term returns for shareholders in the Irish market.

But many observers have since pointed out that the real elephant in the room is the fact that when home loans run into difficulty, banks often face a lengthy and expensive legal process to retrieve their assets – ie the repossession path is a difficult one in this country.

And while, on the face of it, that seems to bode well for mortgage holders, in the long-run, it is chasing many operators out of the country.  And, consequently, that is bad news for everyone.