Shareholders grill Myles O’Grady about poor deposit rates at Bank of Ireland AGM
Bank of Ireland chief executive Myles O’Grady was put on the defensive by shareholders at Tuesday’s annual general meeting over the relatively low rates the bank is paying on deposits.
The CEO, who was attending his first AGM as CEO after taking up the job in November, faced several questions from the floor over the gap between BOI’s rates and the much higher rates the bank earns from deposits lodged with the European Central Bank (ECB).
The ECB raised its deposit to 3.25pc earlier this month – it's seventh hike since last July. BOI did put up the rate on its one-year lump sum savings product last week, but only to 1.5pc - a competitive rate in Ireland, but far below the eurozone average of 2.09pc.
“Why do we have to go outside Ireland for competitive deposit rates,” asked shareholder Sean Quinn from the floor of UCD’s O’Reilly Hall, where the meeting was being held, citing a 2.5pc rate being offered by Germany’s Raisin Bank.
Mr O’Grady said it was “perfectly reasonable” for customers to expect to be rewarded for their savings, but the bank had to “strike the right balance” between mortgage rates and deposit rates.
BOI and the other Irish banks, AIB and Permanent TSB, have managed to hold mortgage rates down through the fastest ECB rate hiking cycle in history, largely by subsidising the loans with profits earned on customer deposits.
Central Bank governor Gabriel Makhlouf told the Oireachtas Finance Committee last month that the Irish banks were generating an additional €1.8bn in interest income from higher ECB rates.
Bursting with customer savings built up during the pandemic, and flush with cash from the 440,000 customers it has added in the last year, BOI does not exactly need to attract more deposits.
Moreover, bank officials say their long-term view is that rates will come down again soon, so matching the ECB’s pace on the way up is risky.
Nonetheless, Mr Quinn was not the only shareholder to voice disapproval of the bank’s approach to rates. A handful stood up to query the bank’s thinking behind the limited payout on deposits.
But overall, there was little sustained objection to the bank’s policies, which have yielded material improvements in its profitability and have helped more than triple cash returns to shareholders to €350m this year.