Thought provoking article by Joe Brennan in today’s IT (free access)
I know the jist of the article’s content is well understood in these parts, but the article lays out the extent of what’s happening in very stark terms. Here are the figures in tabular format, extrapolated from the figures in the article:
Or in words, the Banks receive €2.25 billion from the CB, pay their depositors €78 million and keep almost €2.2 billion - a cool 96.5%. And it's not as if in mitigation the money is doing anything useful or productive, it's sitting in the CB's virtual vault.
A few highlights (I’ve abbreviated, augmented and paraphrased the actual text of the article - you can read the original by following the link above)
Of course none of this will come as a surprise to the cognoscenti of AAM, and we have been over this ground before with the general conclusion in these part's appearing to be that it's all the stupid lazy depositor's fault. I guess fair play to the banks if they can dispense with any feeling of obligation to the taxpayer's who supported them out when it was needed and can now bleed them for every penny they can make. But is there not some moral obligation to play even a little bit fair ?
At the very least should the MOF not intervene via State Savings and use that august body to challenge the banks behaviour rather than being complicit and endorsing it ?
Maybe if we had a financially literate opposition ?
I know the jist of the article’s content is well understood in these parts, but the article lays out the extent of what’s happening in very stark terms. Here are the figures in tabular format, extrapolated from the figures in the article:
Or in words, the Banks receive €2.25 billion from the CB, pay their depositors €78 million and keep almost €2.2 billion - a cool 96.5%. And it's not as if in mitigation the money is doing anything useful or productive, it's sitting in the CB's virtual vault.
A few highlights (I’ve abbreviated, augmented and paraphrased the actual text of the article - you can read the original by following the link above)
“Banks are getting 3.75% on your savings with the Central Bank and paying you an average of 0.13% in a demand deposit account”
The three remaining Irish retail banks saw their combined net profits soar 18 per cent in the first half of the year to €2.05 billion. The surge over a five-year period is even more stark, with profits up almost 240 per cent from a total €608 million for the same period in 2029. While there has been some cost cutting in the meantime, and some “growth” due to the takeover of the UB and KBC books, the change in the differential between the rate the banks are paying and the rate they are receiving must account for a very large part of the increase in profits.
Bank of Ireland had €28 billion on deposit with the Central Bank at the end of the first half. AIB had almost €31 billion. For PTSB it’s the vast majority of the €2.81 billion of “loans and advances” it had with AAA-rated banks. Between the three, you’re talking about over €60 billion.
88 per cent – or about €120 billion – of the €138 billion of cash households have with banks in Ireland are lying in current and on-demand deposit accounts as of May, according to Central Bank data. The average rate these earning is 0.13 per cent – among the lowest on the euro zone.
Following the introduction of a few headline grabbing 3% accounts (mainly term based) last year, AIB expected that a deluge of customers flooding into higher-rate fixed-term deposits would result in the bank paying out the equivalent of about 30 per cent of heightened ECB rates to depositors by the end of 2023. On Friday, its chief executive, Colin Hunt, said it would likely be only about 15 per cent by end of this year, which stands as one of the lowest such ratios – known in banking jargon as deposit betas – in Europe.
Brennan concludes on this with “If you are bothered by the bumper profits the banks are making and still have a sizeable amount of cash in low-yielding accounts, then it’s on you.”
Of course none of this will come as a surprise to the cognoscenti of AAM, and we have been over this ground before with the general conclusion in these part's appearing to be that it's all the stupid lazy depositor's fault. I guess fair play to the banks if they can dispense with any feeling of obligation to the taxpayer's who supported them out when it was needed and can now bleed them for every penny they can make. But is there not some moral obligation to play even a little bit fair ?
At the very least should the MOF not intervene via State Savings and use that august body to challenge the banks behaviour rather than being complicit and endorsing it ?
Maybe if we had a financially literate opposition ?