I can't help but wonder if there is some link between saving Irish banks and the way they then act after the fact, do they become grateful for the salvation or morph into ongoing prodigal sons?
The recent issues with AIB are a case in point. They have been rescued several times now, most recently with a payment totalling €21,000,000,000 which is made up of money from our sovereign wealth fund and borrowings.
As recently as April the bank repaid €3,100,000 to 11,500 customers over errors on insurance policies. They are still keeping busy though, underwriters in Irish Life tell me they are getting a lot of applications in from AIB so people still obviously trust them.
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This is the same company that ended 2010 with losses of €12,100,000,000. Who only cost €8 billion less than Anglo and who broke records for Central Bank fines in 2010 when they were hit with a €2,000,000 bill for overcharging.
So is it any surprise when we now find that 12,000 people had their records potentially mismanaged resulting in possible Irish Credit Bureau problems? It isn't a surprise, it is a disappointment.
And yet Irish people don't move bank, research conducted by Bank of Ireland several years ago showed that you are more likely to leave your spouse than your bank, and any bank that has come here has found it hard to gain a foothold. Even indigenous players have a hard time increasing market share – in particular in the current account space.
Some like NIB have given up the ghost with branches, all 27 of theirs will close and be replaced by a few regional service centres and almost every other bank seems set to close branches.
How many are set to close? About 210 branches of various banks. At present there are just under 850 branches, bringing that down by almost 25% will leave about 640 branches.
AIB will shut 70 of their 270 branches. They now own EBS who have 84 branches – most of them are owner operated and set to close, they will also be laying off 2,500 staff. Ulster Bank will close 40 of their 146 branches and PTSB is going to shut 25 of their 92 branches. It is likely that many regional towns that have enjoyed having one of every bank will now be left with one or two banks.
Banking is broken unfortunately, as of now they can still make more money by lending to the State than they can to individuals which shows that pricing is upside down. Not only that, you don't have to post collateral to lend to the state, with mortgages you do – which means you must put money aside (that you can't utilise) in order to provide a mortgage.
That is what made AIB raise their rates recently. They were losing money when they lent, which is no different than a corner shop buying milk at €1 and selling it for 50c – eventually something will go wrong.
And yet in this broken credit market, which seems tempted to under perform even last year's record-breaking credit drought, the worst in 40 years, there have been some uplifts in interest. Estate agents are reporting higher activity in city housing, mortgage applications are coming in thick and fast, although many have little hope of obtaining credit, and cash buyers seem to be coming out of the wood work when the price is right.
These things would lead me to believe that in Dublin we are at the front of a period of stabilisation in the housing market (strip out apartments). How long that lasts is likely depending on credit which is the missing ingredient.
And between me and you? I think we'll be heading into another boom bust cycle (property goes through them with regularity in many nations) quicker than we suspect we will!
