Sunday 11 December 2016

S&P claims banks won't make profits before 2013

FINANCE

Published 10/11/2011 | 05:00

IRISH banks will struggle to make a profit before 2013 and will remain reliant on support from monetary authorities and the State "for the foreseeable future", ratings agency Standard & Poor's said yesterday.

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The commentary came as Ireland's banking sector fell one mark in S&P's 'Banking Industry Country Risk Assessment', a measure of the risks facing banks in various countries.

Ireland's banking industry now has a score of 7 in a scale that awards 1 to the best environments and 10 to the weakest.

The result puts our banking industry in the bottom third of countries analysed, ahead of countries like the Ukraine, Argentina and Egypt, but behind the likes of Estonia, Guatemala and Turkey.

More detailed analysis shows S&P considers the risk to our banks' funding to be "very high", while risks to institutional frameworks are "high" and competition dynamic risks are "intermediate".

Despite Ireland honouring a $1bn (€730,000) payment to unsecured bondholders at bust Anglo Irish Bank, the Government is described as "supportive" rather than "highly supportive".

Detailed commentary on the Irish banks referenced the "structural earnings challenge" for the sector "arising out of its stock of uneconomic base-rate tracker mortgages and persistent deposit competition".

The ratings agency also expects loan impairments to have a "very high" impact on the banks over the next two or three years, leading to the conclusion that "most banks will find it difficult to return to profitability before the end of 2013".

There was better news on the economic front, where Ireland's score held steady at seven, reflecting the "intermediate" level of economic resilience, "very high" level of economic imbalances and "very high" credit risk in the economy.

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