# Bank of Ireland at the Finance Committee



## Brendan Burgess (14 Sep 2022)

Gavin Kelly  - Interim CEO
Susan Russell
Aoife Leonard

Talking about digital banking.

We closed 88 branches last year due to customer preferences.

[I missed a good part of it] 

Pearse Doherty:  Bank of Ireland has pulled 600 ATMs. And you sold the rest outside the banks.  So the reason you did this is that BoI would have needed the approval of the Central Bank to charge fees at ATMs. But the private company you sold to does not need such approval. 

You took out those ATMs because the buildings were worth more without the ATMs.


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## Brendan Burgess (14 Sep 2022)

Not sure how AIB go so much flack and BoI got away with it


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## Brendan Burgess (14 Sep 2022)

Pearse: asking about mortgage rates. 

When will the bank decide if they are passing it on. 

CEO: I can't talk about it.  The board has not discussed it yet.  I don't expect it at the next board meeting. The Executive team brings it to the Board and we don't intend to do it at the next meeting. 

60% of our mortgages are on fixed rates 

30% trackers 

10% variable 


Pearse: You charge the highest variable rates.
You are charging 4.5% 
AIB is charging 3.15% 

It would be the art of madness to be on a [fixed] rate with Boi.  You can save thousands by switching to Avant or AIB. 

Why would any of your customers remain on a 4.5% 

Are you just "taking a hand at them"?  

CEO: We write to them every year 

Pearse:  Your bank knows that there is a cohort who will fix their rate and then at the end of the fixed rate they will default to the variable rate or do you think that they just like giving you money

CEO: We provide a comprehensive suite of products... 

Pearse: Why would anyone be with your bank on 4.5% when they could be with AIB at 3.15% 

CEO: The service they get from us...

Pearse: Give me a sound finance reason 

CEO: Every person's circumstances is different.

Pearse: Give me an example of one

WE know that people are afraid of moving.  YOu are doing it consciously. There is no financial reason why you should be with BoI on a variable mortgage. If you have a mortage of €200k , you will save €30k by being with AIB.

You are exploiting the inertia of your customers. 

CEI - we write to them every year. And every customer is different. 

Pearse: what is your blended cost of funds

CEO: We don't disclose it. 

Pearse: What are you paying on your deposits.  
CEO: We pay 1/4% on deposits 

Pearse: So you are charging 18 times more on the mortgage rate. 

But what is your blended rate. 

Your total costs are less than 1%.

CEO : No.

pearse: Why don't you allow existing customers avail of the green rate
CEO: ..... 

Pearse: Why?  not your loyal customers. 

CEO: We keep it under review all the time.  

Pearse: What is the rationale for discriminating against existing customers.? 

CEO: We have a range of products. We do keep them under review. 

Pearse: Just explain it . I am a customer of BoI. I do have a mortage with you.  Bernard is a new customer. Why would you offer him a better rate than me. And I have been with you for 15 years.  You are not offering this to me but you will give it to Bernard. 

CEO:    

Pearse: How does the board justify offering Bernard a cheaper product . 

CEO: We will talk to you about what rates we have 

Pearse: But you are not going to give me a cheaper rate. 
Once you are in the door, you get a worse product than . 
I will give you one more chance - isn't it the reason and you can't say it "We have got you. Why would we offer you a cheaper rate when we have got you?" 

Pearse: At the next review you should end the discrimination.


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## Brendan Burgess (14 Sep 2022)

That was a real _tour de force_ by Pearse. 

Brilliant.  It's great to see the bankers made feel uncomfortable. 

Brendan


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## Brendan Burgess (14 Sep 2022)

I missed a part of it, but my local FF TD Jim O'Callaghan is attacking them on the 4.5% variable rate

cash back is what you use to get new business

Your high value is 2.5% with no cash back , or 3% with cash back.

But will you inform a customer how much they will pay for the cash back mortgage

CEO: WE show them the full cost of credit and they must discuss it with their solicitor

We discuss all the options at the interview but don't do a comparison in the letter of offer.

O'Callaghan  KBC 

CEO KBC customers will be paying the rate they are being charged today

If we take a decision  to change rates the changes will be applied to all customers equally. 

If we reduce rates by .25% we will change the rates  charged to KBC by .25% as well. 

[Brendan: This is very important. Comes at the end of


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## Dermot (14 Sep 2022)

There was nothing brilliant about Doherty.  He just asked the questions that anyone with a bit of interest in the Mortgage subject would be aware of.   If he read the Askaboutmoney forum he would see that the questions he asked are well thrashed out here.


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## Brendan Burgess (14 Sep 2022)

Some other TD - don't recognise him

Michael McNamara - Independent for Clare.

So are you saying that KBC and BoI customers will have different rates.

CEO - as part of the deal. They will have the option to choose fix rates.

TD: So is it fair to say that when KBC customers exited the market, they looked after their customers in a way that you don't.

So you are going to charge KBC customers a lower variable rate than your own

You have 10% of your customers on variable rates - but what percentage taking out a new mortgage are variable. CEO: 95% are fixed.

TD When the fixed rate ends - what percentage switch to another lender?

CEO: Most fix, some switch, some default to variable

TD: Can you fix in advance of coming off the fixed rate?

CEO: The date

TD: How long does it take to fix a rate?

CEO: It doesn't take long. They send in a form.

TD: Depends on the LTV. How do you calculate the LTV.

CEO: Based on the ltv when they took out the mortgage.

TD: So not only are they paying way more than your competitors, they are paying based on an incorrect LTV.

House prices are at their highest ever.

CEO - our fixed rates are the same for all LTVs. Only or variable rates change for LTV.

TD:  What is the rationale for giviing a discount to new customers of green mortgage and not giving it to existing customers.

CEO: Waffle

broadcast has died.


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## Jim2007 (14 Sep 2022)

Brendan Burgess said:


> That was a real _tour de force_ by Pearse.
> 
> Brilliant.  It's great to see the bankers made feel uncomfortable.
> 
> Brendan



And you wonder why foreign banks don't want to enter the Irish market...  No CEO in his right mind would sign himself up for political silly games with the likes of Pearse Doherty.  It might make you feel good but it does nothing to advance your case in the board rooms.


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## Brendan Burgess (14 Sep 2022)

Hi Jim

If it highlights the predatory interest rate behaviour of Bank of Ireland, then I do feel very happy.

I would be even happier if they stop exploiting customers.

Brendan


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## Paul F (14 Sep 2022)

Jim2007 said:


> And you wonder why foreign banks don't want to enter the Irish market... No CEO in his right mind would sign himself up for political silly games with the likes of Pearse Doherty.


Well, Avant have been offering mortgages in Ireland for a couple of years and they are basically a foreign bank – they are backed by Bankinter of Spain. They don't have the lowest rates at the moment but they offer long-term fixed rates, one of only two lenders to do so.


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## Paul F (15 Sep 2022)

The video of the entire session is here (the one for 14th September):

Jump to the 3:45:08 mark for the start of the BOI session (transcript)
Jump to the 4:00:15 mark for Pearse Doherty's questions on BOI's very high variable rates (transcript)
Jump to the 4:11:26 mark for his questions on BOI's discrimination between new and existing customers on interest rates (transcript)
Jump to the 4:24:18 mark for Jim O'Callaghan's questions (transcript)
Jump to the 4:36:20 mark for Michael McNamara's questions (transcript)


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## jpd (15 Sep 2022)

So the bank works like Starbucks - segregate your customers into cohorts and and charge each cohort the highest price you can.

Or even my local window cleaner - charges each customer what he thinks they will bear

In the end, it is the customer's choice to use the supplier or change to a different supplier - short of nationalising the mortgage service completely, I don't see what can really be done other than making sure the whole pricing procedure is transparent and the costs shown to all

I am not condoning the practice but why would you expect a bank to be different to every other business ?


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## Paul F (15 Sep 2022)

jpd said:


> In the end, it is the customer's choice to use the supplier or change to a different supplier - short of nationalising the mortgage service completely, I don't see what can really be done other than making sure the whole pricing procedure is transparent and the costs shown to all
> 
> I am not condoning the practice but why would you expect a bank to be different to every other business ?


I don't expect banks to behave any differently to any other business but I want banks to be regulated in such a way that they can't do this.

It's much easier to change window cleaners than to change banks. And the consequences of not changing from a poor-value window cleaner are much, much less significant than the consequences of not changing from a poor-value lender.

And it's much harder to compare the true, long-term prices of two mortgages than the prices of two window cleaners, which increases the chances that someone will make a bad decision.

Banning cashback would go a long way to addressing these issues.


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## PGF2016 (15 Sep 2022)

Is there any reason why those on the variable rate can't switch to a lower fixed rate (e.g. negative equity)? If they can switch but don't due to inertia then it's hard to feel sorry for them.

Not much different to someone paying over the odds in one supermarket for something that is available for less in a competitor.


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## Paul F (15 Sep 2022)

PGF2016 said:


> Is there any reason why those on the variable rate can't switch to a lower fixed rate (e.g. negative equity)? If they can switch but don't due to inertia then it's hard to feel sorry for them.


Only one technical reason that I can think of: they are thinking about moving home in the next few years and don't want to run the risk of having a break at that point.

But many, many people don't understand interest rates and/or are terrified of personal-finance issues. The posters on this site are not your typical mortgage holder. We shouldn't lose sight of that.


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## ashambles (15 Sep 2022)

Paul F said:


> Only one technical reason that I can think of: they are thinking about moving home in the next few years and don't want to run the risk of having a break at that point.
> 
> But many, many people don't understand interest rates and/or are terrified of personal-finance issues. The posters on this site are not your typical mortgage holder. We shouldn't lose sight of that.


A few years ago I used variable rate on a 20-year mortgage I drew down but which I was going to fully repay within a year or so (and did repay). 

The banks are likely aware that a good proportion of SVR are loans that have shorter and less profitable lifespans than normal so it doesn't surprise they charge more. 

What stood out to me was BOI saying they offer 0.25% interest on deposits, yes they do offer 0.25% but only on a couple limited products like the FTB saver account. Effectively their deposit rate for most customers is 0%.


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## NoRegretsCoyote (15 Sep 2022)

ashambles said:


> The banks are likely aware that a good proportion of SVR are loans that have shorter and less profitable lifespans than normal so it doesn't surprise they charge more.


Last time I checked nearly 20% of all mortgages were on variables and 9% of new lending was on a variable.

For sure there are people like you who are able to overpay but for a big majority it is pure lack of knowledge and inertia. 

These people are cross-subsidising my mortgage so I don't really mind


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## ashambles (16 Sep 2022)

NoRegretsCoyote said:


> Last time I checked nearly 20% of all mortgages were on variables and 9% of new lending was on a variable.
> 
> For sure there are people like you who are able to overpay but for a big majority it is pure lack of knowledge and inertia.
> 
> These people are cross-subsidising my mortgage so I don't really mind




BOI in post #3 note the SVR is 10% of mortgages (probably shrinking daily )

It's good that people borrowing now have relatively cheap long term fixed rates, and a simple decision to make, made simpler now by an unattractive SVR. 

I think their aim is get as many customers on fixed as possible as it makes the Irish no-repossession lending safer for them.  Ireland was always an outlier with our high number of variable rate customers.


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