Wednesday 23 October 2019

'No improvement in Irish banks' earnings this year'

Deutsche Bank faced capital buffer. Photo: Bloomberg
Deutsche Bank faced capital buffer. Photo: Bloomberg
Donal O'Donovan

Donal O'Donovan

Irish banks will see no material improvement in earnings over 2019, and the era of profit-boosting write-backs has ended, according to S&P Global Ratings.

The Irish banks' "recovery phase" is drawing to a close, the ratings agency said in a sector update.

Increasing competition within the sector has driven down lending margins including in the key mortgage space, making raising the "modest" proportion of fees and commissions in banks' mix critical - especially for banks other than Bank of Ireland and AIB.

The controversial sales of non-performing loans are set to continue, driven by regulatory pressure.

Meanwhile, the European Commission is now working on its largest regulatory push on banking since the financial crash, a move that could curb UK banks' access to the single market, according to an internal draft document seen by Reuters.

In the 12-page strategy document, EU officials outline provisional financial services plans for the bloc's executive body, which sets the legislative agenda, and is due to see a change of top officials this year for a new five-year term.

The document makes clear that there will be an acceleration of financial regulation, after many years when little has happened following the wave of rules after the financial crash.

It suggests a review of the capital framework that would extend the extra capital buffer imposed on the world's biggest banks, including Deutsche Bank, to other important institutions like settlement houses.

The document outlines the possibility of "concentration charges" on banks' holdings of risky government debt, a step global regulators have so far shied away from.

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