Moody’s bumps up ratings on Irish banks

Credit rating agency Moody’s has upgraded the long term debt and deposit ratings of Irish Banks: Bank of Ireland (BOI) and Allied Irish Banks (AIB). It also upgraded each bank’s baseline credit assessment by one level. Irakli Pipia, Vice President-Senior Credit Officer at AIB said “the rating upgrades reflect a range of positive factors, including further reduction in non-preforming loans, improved capital ratios and achievement of stable core profitability”.

 

From the end of 2015 to the end of 2016, BOI’s problem loan ratio fell from 11% to 7.9% and the  loan to deposit ratio fell from 112% to 108%, signalling improvements in asset quality and a better funding ratio. The bank’s BAC was upgraded from ba1 to baa3, the 10th tier of Moody’s rating scale.

 

Moody’s also bumped its baselines credit assessment of AIB by one tier from ba1 to ba2. It cites a reduction in the percentage of the bank’s problem loans from 18.6% last year to 14% at the end of 2016 and the bank’s more liquid position.

 

Various other ratings were also affected in …

Read More

Two identical first time buyers walk into a bar, one qualifies, the other doesn’t

The Central Bank rules on curtailing mortgage lending have had an interesting effect, first is that we are seeing more loans draw down that might not have because people are bringing forward consumption due to the fact they won’t qualify for the same amount again in the future. This is literally the opposite of the intended effect.

Second is that it’s causing chaos for prospective buyers who may hold an exemption or need an exemption because there are quarterly reporting rules that mean banks can’t offer a new loan until they know if an old one will be drawn or become an NTU (not taken up).

Perhaps the easiest thing to do is explain it, currently you can’t get an exemption from Ulsterbank or AIB/EBS/Haven or BOI, but you can from PTsb and KBC. The banks that can’t give you one (and remember it’s only one of LTV or LTI not both) are hogtied because they have given the limit of exemptions (c. 15%-20% of lending) already in loan offers and they have to estimate both the annual and quarterly …

Read More

Talking Money – Switch your mortgage to save

This week on ‘Talking Money’ Karl Deeter and Jill Kerby were discussing ‘switching’ with Cormac on RTE’s Drivetime. It was coincidental that many of the points we made were reinforced by the Central Bank findings this week on mortgage switching on points such as assertive customer behaviour being important and not allowing inertia to hold people back.

Read More

Newstalk: Pat Kenny Show on variable rates

We were asked to speak with Pat Kenny today about variable rates and the government plan to intervene to make banks drop them. This was, after considering various pieces of evidence shown to be a deeply political rather than pragmatic move. We also demonstrated that there are documents which the Minister for Finance had drafted up with the banks specifically stating that he would not intervene on matters of pricing, the recent round of ‘meetings’ is in direct contravention of that.

Read More

Mortgage rates set to drop and competition to increase in 2015

We have commented several times since last year that the trend for mortgage rates in 2015 will be to see them drop. With spreads of c. 300bp’s on lending it makes it one of the reliably profitable sectors of banking given the stringent underwriting being applied.

With the Central Bank looking to curtail first time buyers but doing nothing about incumbent borrowers getting restricted it means that they have directed the market towards refinancing.

This is because one of the niches left on the table is that of existing variable rate holders, which banks will now try to tempt away from one another in an effort to grow market share.

There are many who cannot take part and below is a list of the mortgage holders who won’t benefit.

Those in negative equity, they are going to be stuck when it comes to refinance, they can trade up with a negative equity mortgage but they won’t be able to ‘switch’. Those on fixed rates which accounts for in the region of 50,000 mortgage accounts, they face break penalties, and only …

Read More

RTE Radio 1: Talking Money with Karl Deeter & Jill Kerby

On talking Money on the 24th of November we looked at the issue of mortgage arrears and the role of the Insolvency Service in terms of finding ways to get solutions with guaranteed end dates. There is a mismatch between the goal of banks and borrowers and it is resulting in solutions that often don’t work.

Read More

KBC launch a ‘quick approval’ process

For a while we have seen competition starting to heat up a little in the mortgage market. Several moves recently have started to demonstrate this further, Bank of Ireland have their ‘pay you to borrow from us’ campaign, KBC had a ‘pay you to switch’ along with rates that beat everybody else.

Now they (KBC) have launched a quick approval process which aims to cut down the time it takes to get approved which at it’s worst was taking up to four weeks with some banks. This is only for an approval in principle, which isn’t worth much (not like a loan offer is) but it is the first step in the mortgage process in terms of getting meaningful feedback from a lender.

They have a first time buyer 1yr fixed rate of 3.5%, short term fixed rates are where banks tend to go to attract business as the first year costs are what many buyers are fixated on rightly or wrongly.

There is one bank rumoured to be considering a return to brokerage, another who shut operations considering re-opening …

Read More

Bank of Ireland will pay your stamp duty (because they can’t pay brokers)

Something many people don’t know is that Bank of Ireland are not allowed to distribute through brokers for another few years.

This means they are being locked out of one of the most dynamic channels in the market. Equally, they were paring back on ICS which recently sold.

They had often complained that it was ‘too expensive’ to pay brokers procurement fees, but now they are willing to pay customers even more than they paid brokers! This is because they are losing out to better offerings through better advice channels.

There is no other way for them to compete at present without literally paying for the business and we take that as a huge compliment, it also shows up the inherent contradiction in their past claims of brokers being ‘too expensive’, clearly in comparison they are not.

Lastly, they don’t pay your stamp duty, they pay the 1% of the loan amount, the idea that it pays your stamp is merely branding, it could go towards anything including a day at the races.

Read More

ICS Building Society RIP 1864 – 2014

After 150 years the Irish Civil Service building society (known as ICS and a subsidiary of Bank of Ireland) is set to close. The letter delivered to the intermediary channel is on the left.

ICS started before the formation of the State and was subsumed into Bank of Ireland in the mid 1980’s.

The relationship with mortgage brokers was long standing, although in recent years there were a few developments which caused it to lose market share.

ICS first took brokers away from Bank of Ireland in c. 2009, previous to this brokers could deal with either a local branch (we dealt with now closed Westmoreland St. branch) or via ICS.

Then they reduced procurement fees, lastly they engaged in ‘dual pricing’ where it was cheaper to go to BOI than to ICS. All of these things were perhaps justified in the view of ICS but it didn’t mean people would then borrow from them and these things combined lead to less broker support …

Read More

Boucher says ‘X’ then BOI says ‘Y’

To veto or not to veto, that is the question…

There is a clear message of ‘veto’ coming from BOI, that has been covered in the press following his comments to the Oireachtas Finance Committee.

‘He said his bank would seek to veto any proposal from Personal Insolvency Practitioners (PIP) featuring mortgage write-down for its customers. Bank of Ireland’s policy is only to write off mortgage debt in cases of bankruptcy or personal insolvency, where the bank is forced to make the move’ 

Then they email all of the PIP’s the email below which states that they do want to engage, but to do so on a basis outside of formal arrangements and prior to things going that route, which makes sense if their message is that they will veto those anyway.

It is unrealistic to make this request then make a habit of saying ‘no’ twice, if they do all of the debt advisors will realise it’s a ruse and go straight to bankruptcy which will cost the lender, or they will always …

Read More