Wednesday 21 February 2018

AIB market share hit by mortgage price war

AIB headquarters in Ballsbridge
AIB headquarters in Ballsbridge

Gretchen Friemann

AIB's share of the mortgage market slackened in the last quarter as the part-nationalised lender faced intensifying competition from rivals.

The bank's decline in market share - from 37pc to 34pc in new mortgage drawdowns - marked the sole disappointment in the better than anticipated interim results, which set investors' pulses racing and propelled the share price to its highest level since June when the Government shed a 28.8pc stake in AIB in a €3.4bn initial public offering.

Yesterday the stock climbed 3.9pc to €5.76 in early morning trading before sliding back to €5.592.

Much of the ebullience stemmed from reassurances the bank will not be forced to set aside more cash to deal with the industry-wide tracker mortgage crisis.

Another €500m clipped off its now €7.3bn worth of impaired loans - the most challenged segment of its non-performing exposures, also boosted sentiment.

The one jarring element was its declining market share in the new mortgage market. AIB remains the biggest player in the sector but the reversal highlighted the challenge it faces in maintaining this position as ultra-low base rates, rising employment and property valuations trigger a price war.

In September, AIB cut both its standard variable rates and fixed rate home loans - a decision now seen as an attempt to arrest the inroads made by competitors. According to Owen Callan the latest results indicate the bank's market share had declined to the high twenties over the summer as consumers snapped up more attractive fixed-rate mortgages from rival lenders.

Both KBC and Permanent TSB have repeatedly cut their rates over the past year, piling pressure on market leaders, AIB and Bank of Ireland.

Davy's Stephen Lyons said the latest results to the end of September imply AIB's share of the new mortgage market has dropped to the low 30s.

Part of the problem, according to Mr Callan, is that margins remain relatively attractive and the European Central Bank's low base rates, which are not predicted to move until 2019, offer scope for further mortgage rate cuts.

There are questions too about whether AIB was caught on the back foot. Its market momentum was based around standard variable rates but recent figures from the Central Bank show consumers have preferred competitive fixed-rate mortgages rather than cheap SVR rates.

On a conference call to analysts CEO Bernard Byrne said the bank continues to target that "mid-30s range".

Irish Independent

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