It was hardly a surprise that KBC Bank posted a net loss for 2020 when it delivered its results last week. Given impairment losses recognised in the first half of the year due to Covid, it was never going to be much different to other banks pushed into the red by the pandemic. Its loss was a modest €48m.
KBC also saw solid growth in its new mortgage lending, which was up 30pc on a quarterly basis and it delivered the strongest quarter on record since the start of the retail bank here in 2013.
The bank may be moving in the right direction with a 12.6pc share of the mortgage market, but its biggest challenge is that it remains a small player in the Irish banking landscape.
This reflects a deeper problem for the entire banking sector. KBC just isn't big enough. It provided a valuable alternative to the big two banks when it comes to mortgage lending. But it would be better if the sector had more banks capable of evening-out the dominance of the big two.
It isn't that long ago KBC's parent company in Belgium looked at pulling out of the Irish market or selling on its Irish operation. In the end it decided to stick it out. It looks like it was a good decision after some very hairy years in the wake of the property crash.
At the time it was grappling with legacy issues from a series of losses on loans given out during the house price boom years.
It was also looking at the additional capital requirements on all banks due to be heaped on the sector by the Central Bank.
NatWest's likely to decision to withdraw Ulster Bank operations south of the border by selling on its loan book is another blow in a less than ideal banking landscape. In Ulster's case, the challenges relate to legacy issues from the last financial crash, the extra burden of additional capital which changes the profit model and whether it can take on the big two of AIB and Bank of Ireland in a relatively small market.
Covid and the future challenges it will bring for small business customers may have been the final nail in the coffin and it may have pushed the British bank in the direction of abandoning the Republic of Ireland market.
NatWest is expected to make an announcement on the future of Ulster Bank soon, possibly later this month. PTSB has hopes to grow its business loan book but suffers from similar scale problems. It has done a lot to deal with legacy crash issues but some still linger. In a way it is a hybrid of KBC (on small scale) and Ulster (on legacy).
This all raises the question of where the banking sector is going to be in Ireland in just a couple of years. KBC is committed to the market, which is a positive for providing competition. Ulster looks like it is heading out the door.
The big two look unassailable in terms of market share, but do they have the flexibility and bounce required to drive the economic recovery that will be needed after the pandemic?
Each has their own battle to fight, against each other, and against the new digital alternatives like Revolut.
Alternative finance options, such as non-bank lending for small businesses, are growing in the Irish market. These will end up playing a much bigger role in that segment of the market in the next few years.
The Irish Strategic Investment Fund now looks like it is coming into its own. Set up by Michael Noonan as finance minister in the dark days of the recession, the plan was to take some of the billions held in international stock markets through the National Pension Reserve Fund and use the money to support companies at home.
Initially, the fund looked too big for the number of qualifying projects that might be out there. But it has set about supporting Irish companies while also underpinning the network of available funding that is out there through venture capital and other investors.
Taking a punt on Irish firms is a tougher business than getting global fund managers to buy the various stock indices. A lot can go wrong, and even if it invests well, it can take time for investment growth to be realised.
According to its 2020 report, published during the week, the fund saw an impressive 6.2pc increase in value added in 2020.
The fund consists of two basic parts - the discretionary fund, which is worth around €8.6bn - and the non-discretionary fund which holds investments in the banks. This bank part of the fund is beyond the control of ISIF decision-makers and its value did slide by a massive €3.9bn to €6.9bn last year as bank share prices tanked.
This comprises the state's shareholding in AIB, Bank of Ireland and Permanent TSB.
However, ISIF's own investment performance has been hemmed in recent years by having to sell down its position in most of the global stock markets in which it held shares. It had to retain that money in relatively liquid, but lower-yielding assets.
If it had retained its enormous global share portfolio it might have performed very well since 2014. However, the global portfolio has delivered a much more modest average return of 1.5pc per annum since 2014.
On the other hand, it would not have been able to turn that money into available cash quickly as required by new government initiatives on the likes of housing.
The more liquid investments enabled it to draw down cash to invest in Irish companies and it also enabled it to set up a €2bn Pandemic Stability and Recovery Fund (PSRF) quite quickly.
This fund has so far committed €400m to projects including a loan to Aer Lingus.
There are another €600m of projects in the pipeline but it is possible it won't actually invest all of the €2bn.
ISIF has also set aside €2bn from what was the global share portfolio as reserve capital for the Land Development Agency and Home Building Finance Ireland.
The global portfolio had €5.5bn at the end of 2019. The plan is to put it to work during the pandemic and helping with the housing crisis.
Of the €500m of added value attributed to the fund, just 20pc of the portfolio contributed most of the gains. Instead of these coming from gains in international stock markets, as might have happened in the past, they represented increases in the value of shareholdings held in developing Irish companies.
They won't get every call right, but they now have enough scale and have backed enough horses in the race to ensure a decent investment performance.
Will it be enough to fund public sector pensions in the future, which was the original plan for the NPRF? It looks like we'll be crossing that bridge when we come to it.
Consultancy firm PwC Ireland has told staff they won't be returning to the office until September, unless they want to. It is a strong confirmation that things may not get a whole lot better until the autumn. But it is also a toe in the water about what might happen after Covid. It makes sense for PwC because they might as well take any uncertainty out of the issue in the short term for staff.
However, the really big question is what firms like PwC will do when this is all over. There is uncertainty about how many staff will want to go back to an office and who will not. The Government's initiative, talked about by Leo Varadkar, in recent weeks, envisages employees having the right to ask to work from home.
Some big services companies have already told staff they will be switching to a hybrid model from now on, where they come to the office a certain number of days per week.
Larger employers will want to remain competitive by offering the best deal possible to staff. However, a hybrid model brings its own complications, not least of which are managing productivity and utilising expensive, unused office space.
At least PwC has moved quickly to clarify arrangements for the next few months.