By the time the Treasury retail banking review was released in November, the future of this sector has already been determined.
The IB’s decision to withdraw cash services from 40% of its branches nationwide is only the latest in a series of rapid changes that have hit customers in the last year and a half.
With the pending withdrawal of Ulster Bank and KBC, the sector has emerged and scrambled hundreds of thousands of customers to switch accounts to one of the remaining three domestic providers (AIB, Bank of Ireland and Permanent TSB). I am doing.
Currently, one of these options seems clearly unattractive to an important cohort that uses basic banking services such as cash deposits at local branches.
That’s all about choice and competition. AIB collects some of the better assets from Ulster Bank, such as corporate loans and mortgage loans, and leverages its quasi-monopoly power in the market to basically do what it wants.
CEO Colin Hunt is doing something reasonable. After all, the AIB move has reduced costs, and cash services are not making money for modern banks.
But it doesn’t look good. Ulster Bank hasn’t gone out yet, so Hunt is imposing his advantage.
There is a small political storm, but it will be blown away soon as Dáil is off during the summer. And Treasury Minister Paschal Donohoe doesn’t mind weathering the lean-trimmed AIB, as it’s exactly what investors want to see.
An important part of a bank review is developing a strategy for holding a state stake in a bank.
NTMA was almost completely sold out by the Bank of Ireland following a stock placement plan dating back to mid-2021.
The AIB is on a similar path, with a combination of opportunistic block sales and drip-feed transactions, with a gradual decline in the government’s majority stake.
Irish bank stocks were strong in 2022 against the global bear market. This is primarily due to the improved profit outlook for survivors, especially the AIB and the Bank of Ireland, due to market consolidation.
But neither agency is waiting to hear what the department is trying to say about the future shape of the industry. Instead, they are shaping it themselves.
It’s easy to see why AIB chose this path. Ledger makes sense to move customers to cashless services and remote access, especially because the cost of servicing a branch in a remote location is exorbitant.
And to be fair to bankers, they have been running in very poor conditions for years, with negative interest rates digging into their returns. That’s why Ulster and KBC are leaving. In addition, Irish consumers are not keen to pay to maintain cash services, which can be difficult to sympathize with when complaining that those services are missing.
However, early results from the ministry’s public consultations and surveys reveal that people prefer to serve nearby and half of all Irish people have only one banking relationship. This means that if the AIB withdraws in the fall, thousands of people will confuse basic needs.
Unfortunately, the verdict that a bank review could give in this situation would be too late.