Why sell AIB

What counter arguments that relate to Banking?.

I have a very strong feeling that we have all been indoctrinated that the Market knows best.
Indeed I fully agree that Market does know best, but only if it includes Banking ,which it patently does not include.

So in Banking , Market was suspended and we bailed the Banks out.
So we let AIB go to Market , AIB gives millions to new Private Shareholders for another 20 years , and when it re-blows up in 20 years Irish Citizens bail them out.

I think my question still stands.

Competition and state aid legislation? No comment on the impacts there for a start. Government interference in the market, what impact will that have on competition?

You seem to ignore the fact that the bailout was a government decision, not a commercial one.

Leo said:

Competition and state aid legislation? No comment on the impacts there for a start. Government interference in the market, what impact will that have on competition?

You seem to ignore the fact that the bailout was a government decision, not a commercial one.

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You have hit it .
Let Banks stay with Market whilst they make money.
Let Banks get too important to fail.
Let Banks be bailed out by Joe Citizen.
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Question still stands.

(never sell a laying hen)

Gerry Canning said:

I see Ulster and BOI have said they will not reduce Standard Variable Rates (SVR)

I confidently expect that AIB will be forced by its owners (me) to reduce SVRs.
That puts pressure on the rest .

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Assume the State sells AIB. Who benefits ? The State.

Assume the State retains its ownership of AIB and uses its influence to benefit customers with SVR mortgages. Who benefits ? AIB customers with SVR mortgages.

Expressed in these terms, the needs of State (i.e. you and me) should outweigh those of AIB customers with SVR mortgages (i.e. 90-something % of the State). That's tough on AIB customers with SVR mortgages, but there are no easy choices in this matter.

As for "puts pressure on the rest", I don't see BOI or UB/RBS management yielding to Government pressure or public mood.

Tarfhead,

Quote {needs of state should outweigh AIB SVR Mortgage holders}

If AIB reduce rates by 1.5% on their SVR , as sure as night follows day the rest will follow.
What that means is the State ie you and me , will benefit on.
1. Svr mortgages from all banks reduce ,that is a state wide benefit.
2. Long term rates will stay at a reason able level.If they can overcharge as in SVRs they will.
3. I have no hard issue selling AIB ,but worry it is ideologically driven , not driven for our medium/long term benefit.
4. I worry that putting them back into the Market will leave us exposed to re bail them out in the future. (remember in my life-time we have bailed them out twice, and it is the same management in place)

I don't think many would follow suit, and certainly not to the tune of 1.5%. None of the banks will look at the huge numbers in arrears or negative equity, so that just leaves new applicants who I presume are shopping around or those with equity stakes who likewise could shop around, but generally don't do so. The numbers switching mortgages has historically been low, partially down to the red tape and costs involved.

If they all dropped by 1.5%, you can be sure charges would go up to balance the books. Then a larger percentage of the population end ups paying for those on SVR mortgages.

Gerry Canning said:

If AIB reduce rates by 1.5% on their SVR , as sure as night follows day the rest will follow ..

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You assert that as a fact, but it is not backed up by evidence. In my recollection, competitor banks closely watch each other for rate increases, less so for decreases. If we accept that SVR rates are where they are to offset losses on trackers, then why would BOI, or any other lender, choose to reduce net profit / increase net loss from mortgages ?[/QUOTE]

Gerry Canning said:

1. Svr mortgages from all banks reduce ,that is a state wide benefit

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Reducing rates on AIB SVR mortgages benefits SVR mortgage holders only. It doesn't benefit;
- me, as I am neither an AIB customer, nor a SVR mortgage holder
- mortgage holders from any other lender
- AIB mortage holders on other rate schemes
- people who don't have mortgages

Tarfhead.

If AIB reduce rates other Banks will follow , it has always been thus.
Particularly in future it would mean new SVRs would be at a lower rate . 1% on 300,000 over 25 years is a huge ongoing saving to state/citizen.
Even on other rates AIB could tweek things to keep rates at a competitively lower rate . Again each 1% saved on car loans frees money to stay in our economy.

My main point is that by keeping AIB we should ensure Rates stay reasonable with ALL lenders.

1. Mortgages .
2. Loans.
3. HP .
4. Commercial .

On even 10,000 per year @ 4%
Versus 10000 per year @ 3% , saves the Joe Soaps e100 and that money stays in Ireland.
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Correct if you are not an AIB or SVR holder = no direct benefit.
Incorrect, I have no doubt other lenders must follow.
Other AIB schemes , presume fixed rates can be refixed once term ends.
This will filter down to ordinary loans.
The biggest loser may well be depositors.
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AIBs 2014 profits didn't even come close to covering the loss the in 2013, let alone the years preceding that, same with most other lenders.

While dropping rates sounds great for the ~158k it affects, someone else is going to have to pick up that shortfall. Who do you suggest should pay?

Gerry Canning said:

If AIB reduce rates other Banks will follow , it has always been thus.

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You've used a different form of words to re-state the same assertion.

You may have "no doubt that other lenders must follow" but that does not make it true. Why should another lender choose to follow such an action ? Switching from one mortgage lender to another involves up-front costs (i.e. legal), which would dissuade some or many. If you're in negative equity, AIB aren't going to give you a mortgage to pay off your mortgage with your current lender.

Also, the Government have not used their ownership of AIB to influence commercial decisions that affect some AIB customers. Why would they do so now ?

TarfHead,

Let me then put things another way.

If state sells AIB ,there will be no brake on stopping all Banks charging an extra .25% here and there.
With AIB the drag of public ownership will slow down their wish to raise rates on all lending products , as night follows day that means slightly lower rates for Joe Public..

If future lending charges say .25% less over every loan into the economy ,it will save Joe Soaps a lot over time.
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(no doubt other lenders must follow) . I hold to that proposition.There are few businesses that do not follow the competitors, eventually some fall down and no harm done.With Banks they are too big to fail and too costly to fix again!
Banks chase market share , they price to market, eg if AIB see to little exposure to Agri they will drop rates to get their share.If they have too much consumer lending they will raise rates.
The problem was in the fluffy times most banks choose {Volume for vanity V Profit for sanity} I would fear Banks don,t learn and won,t learn.
I just hope our Central Bank has learned how to check them?
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I would not want Government to influence AIB on Commercial decisions , I would want them to keep an overview on them, as any shareholder should.

I see that in State Ownership AIB have for the 2nd time made a reduction in SVR,s (standard rate mortgages).
I see that in State Ownershio AIB are making a belated recompense on CCP miss-selling.

It appears that in State Ownership AIB are making a faie stab at sorting Mortgages.

Damn it lads , lets sell it to the market and increase rates!

I hear trumpets sounding that our Brave Government are to get funds from saved AIB.
Looks like by mid 2016 we will get 4 Billion of the 20 Billion we put in.
Our brave 2nd in command says the 4 billion will come off my debt?

How nice .
If AIB sell for say 30 Billion and I get 10 Billion to build social housing etc then I applaud.

If AIB sell just to clear my debt ,then I object .
I insist I hold AIB or get a huge profit for the Punt I took {you took the Punt as well}

I see Brendan has a thread on {noonan says AIB shares overvalued} and from thread they look seriously way overvalued.
Yet people are still taking a punt on buying them ?= madness.
I can,t get my head around this , have we learned very little?