When IIB launched their sub-prime lender ‘Stepstone’ the plan was for them to be the inverse of what The Monkeys sang about, they would be your ‘stepping stone’ towards financial stability, they looked specifically at clients who were recently self employed and therefore wouldn’t have 3 years of accounts, people who wanted to refinance who may have had arrears, and other standard specialist lending clients.
Now Stepstonehave joined the slowly (but disturbing) list of Irish Banks to close their doors for business. This means that the Irish financial industry will have to face up to the reality of unsteady world money markets in an ever more local perspective, it’s no longer happening ‘over there in the US’ or ‘across the water’ anywhere else, its up close and personal, especially for the people who were made redundant this week. I feel bad for them, they all did a great job and they were certainly not behind the decision to close up shop, it will also decrease competition in the industry as the number of subprime lenders drops. The only upside is that there are some seriously skilled people on the job market now which is an opportunity from a business perspective for any financial group.
This now leaves several players, Start Mortgages who are the largest by market share, GE who are the largest in size worldwide but not in Irish market share in particular, Nua Homeloans who were bought by Investec, and Springboard who are a joint venture between PTsb and Merrill Lynch (who recently yanked their funding and pulled out of the JV). Start recently made some redundancies but according to inside sources they were fortunate enough to be able to get staff who were not key players to agree to it, this would be the folks who want to go off travelling etc. and for whom a redundancy package was a godsend. GE are making good inroads to the market and because they are not caught in the securitization trap that some lenders are in it may be their boon in the coming year. NUA are a latecomer to the market as were the two lenders who have closed so far but they are weathering the storm quite well and look poised for a good 2008.
The Kensington Group in the UK owned Start Mortgages and then they were sold to Investec (a South African Bank), Nua were also bought by Investec so perhaps they will be amalgamated into the greater group? Otherwise you will have two competing firms with a common owner, thus far where examples of this existed one side pulls out of the market (eg: Ulsterbank basically pulled out of the broker market while First Active took the reins), but for a company who’s only business is lending this might not be a solution.
Then there is Springboard, who as part of the PTsb group are certainly suffering right now. They are basically a Broker Only channel and currently there is a large industrial dispute between brokers and PTsb, in fact it has even gotten to the stage where the sister company Irish Life is being dragged into the foray. Denis Casey recently went on the record saying that he was sure brokers would honour their commitment to ‘best advice’ which is interpreted in the Broker Community as a veiled threat of calling in the Regulator if brokers don’t support them but that will just further alienate them. The shareholders are the ones I feel sorry for, I don’t believe that the industrial action is being communicated to them and I heard that new applications are down by 50% or more.
The specialist lending market has had problems world wide, nowhere has been hit worse than the USA where you can now buy a house for about €75 yes… seventy five euro. We won’t be seeing that in Ireland thankfully, but 2008 won’t be an easy year for specialist lending, the contradiction is that never before has their been such a demand in the Irish financial services market for the exact kind of companies that are closing their doors for business. In the meantime we’ll sit and watch the likes of Springboard.