AIB increases profit forecasts because savers not switching to higher interest accounts

Brendan Burgess

Brendan Burgess

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www.irishtimes.com

AIB hikes income forecasts amid slow move by savers to higher-rate accounts

Lender now expects its net interest income to top €3.75 billion, some €150 million higher than its previous guidance
www.irishtimes.com www.irishtimes.com


AIB hiked its full-year net interest income forecast on Wednesday, as savers have been slower than expected to move from low-rate accounts into its more attractive products.

The bank now expects its net interest income (NII) to top €3.75 billion, some €150 million higher than its previous guidance, it said in a trading statement.

It sees its net interest margin (NIM) – the difference between the average rates at which a bank funds itself and lends on to customers – coming in higher than 3 per cent, up from its previous forecast for a figure in excess of 2.9 per cent.
 
I opened a Fixed Term product account. The rigmarole that I had to go through to open the account was not easy. In the end they made such a mess of opening the account that I asked them to close it and give me my money back.

I have an appointment with PTSB for next week to open same. It will be interesting to compare the service received.
 
The reality is that AIB's higher interest products consist of Medium Term Deposits and convoluted Regular Savings. These suit some clients with specific needs. They are not suited to many customers who hold money on deposit for general use. Across all the Irish banks the products offering higher rates have been designed/configured to be as off putting and inconvenient as possible (e.g. PTSB no longer offering term deposits online forcing clients to go to a branch). This is complimented by the unprecedented collaboration from State Savings, the absence of competition in the Irish Market and the (justified) resistance to the online outfits (Neo Banks or whatever they choose to call themselves this week).

The Irish deposit market couldn't be more dysfunctional than it is at present. The CBI and the Government are abjectly failing Depositors and the Irish Banks management and shareholders are laughing all the way to the...... bank.
 
But the Irish banks are awash with cash. Why should they increase deposit rates to just attract more deposits which they can't lend out?

Brendan
 
Brendan Burgess said:
But the Irish banks are awash with cash. Why should they increase deposit rates to just attract more deposits which they can't lend out?

Brendan
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Irish banks can re-deposit surplus deposits at the ECB and earn 4%.

The BoI and AIB results show the vast sums they are making off the difference between the ECB deposit rate/mortgage rates and the rate they offer depositors. Yet again in September the ECB rate increase was not passed on by the Irish banks to customers but yet some mortgage rates increased.

Irish banks acted on deposit rates to a small extent in early September under media pressure, now that the pressure has stopped the rate increases have stopped too.
 
Hi Lightning

An interesting point which I have wondered about.

But I don't think it would work.

They will attract a few billion at 3% and make 1% on it.

But they will have to pay 3% on the rest of the deposit book on which they are paying 0.5% at the moment.

Brendan
 
almostthere said:
I opened a Fixed Term product account. The rigmarole that I had to go through to open the account was not easy. In the end they made such a mess of opening the account that I asked them to close it and give me my money back.

I have an appointment with PTSB for next week to open same. It will be interesting to compare the service received.
Click to expand...
Well I went into the TSB , to do same , you have to get a profile first visit , ID etc - more to satisfy the state security obligations first then arranged to bring in deposit cheque in branch - very handy
 
Brendan Burgess said:
Hi Lightning

An interesting point which I have wondered about.

But I don't think it would work.

They will attract a few billion at 3% and make 1% on it.

But they will have to pay 3% on the rest of the deposit book on which they are paying 0.5% at the moment.

Brendan
Click to expand...

Banks pick and choose which products to apply higher rates too. Applying a high rate to one product (sometimes a new product) does not mean that rate increases will occur on other products.

Thats said, obviously the fair and right thing to do is to apply deposit increases to all products. (As the FCA put pressure on UK banks to do.)
 
Brendan Burgess said:
Hi Lightning

An interesting point which I have wondered about.

But I don't think it would work.

They will attract a few billion at 3% and make 1% on it.

But they will have to pay 3% on the rest of the deposit book on which they are paying 0.5% at the moment.

Brendan
Click to expand...

Unfortunately Banks despite being propped up by Government (tax payers) for the last decade are still private enterprises that are really only concerned with their profits and return on equity metrics.

I am pretty sure that banks place all their deposits with the ECB overnight? This is why 3 years ago when I worked in banking there were projects related to reducing or refusing large cash deposits by individuals as it was costing the bank money and they weren't passing negative rates to customers (works both ways).

I think this is where the CBI need to step in on grounds of Consumer Protection, Banks have been quick to pass on rate increases to mortgage variable rate holders, but have not passed on to current accounts which are largely variable rate. I spoke to the CBI about it and they essentially said they don't get involved in commercial decisions.
 
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