Halifax retail arm exit to prompt increase in fees by other banks
Less competition in market and need to widen margins will cost customers into future
THE pullout of Halifax/Bank of Scotland Ireland from the retail banking sector will lead to consumers paying more for their banking, experts warned yesterday.
Less competition and pressure on the remaining banks to get back to profits will mean higher fees and charges.
The Scottish bank is just the latest in a string of banks to either close down or shut large numbers of branches.
Building societies EBS, Irish Nationwide and Permanent TSB are to be merged into one operation, First Active is to disappear and be merged into Ulster Bank, ACC is set to pull out of this market, and National Irish Bank is closing large numbers of branches.
From a situation where a typical Irish town had up to 11 banks, it now seems that more than half of these will be gone by the end of the year.
AIB, Bank of Ireland, the 'Third Force' of EBS, Irish Nationwide and Permanent TSB, Ulster Bank and Postbank will now be the most likely banks left competing in towns.
Financial adviser Justin O'Gorman, of myadviser.ie, said that less competition would lead to higher fees and charges.
"One less competitor in the system means that those left behind can increase margins more easily, which isn't good news.
"If the so-called Third Force of EBS/INBS/PTSB ever comes to pass we could end up back in the bad old days of high banking fees and very little choice. Isn't this what Bank of Scotland Ireland promised to change forever?"
Frank Conway of the Irish Mortgage Corporation said that yesterday's announcement was not a surprise as the Scottish bank had been effectively closed for almost two years.
"It was pushing away business by offering very high mortgage rates. Its five-year rate is 7.75pc, more than double the five-year rate offered by rival AIB," he added.
"The bank has a significant loan portfolio where many mortgages were offered on an interest-only basis for the full term of the loan," Mr Conway added.
The bank, which shook up the banking market here with mortgages that were 1pc cheaper than its rivals in 1999, is to stop taking on new business from now on.
It introduced tracker rate mortgages to this market, but has now decided that it cannot sustain the losses involved in trying to undercut rivals to build a business of scale to justify the cost of running 44 retail branches.
The bank insisted yesterday: "Customers do not need to do anything at this stage and customers' savings and investments remain secure."
However, although current account holders, credit card customers and variable rate depositors will still be able to avail of banking services until May, the bank warned that "ultimately these accounts will close".
Mortgages, personal loans and fixed-rate savings accounts will operate to maturity.
The bank said it will start contacting customers to explain what this announcement means for them and the next steps following this announcement.