Bank Competition in Ireland now that Halifax is departing

It was interesting to this author to observe yesterday the startling performance of AIB and BoI on the Irish Stock Exchange. AIB ended up 8% at  €1.16 (and continued that performance this morning with an opening of 3% up) whilst BoI ended up 9% at €1.30 (and continued that performance this morning with an opening of 4% up). It has been interesting to see the performance of the banks as they reacted to NAMA with the announcement in September 2009.

The concern yesterday is that the exit of Halifax from the Irish retail banking scene will mean we return to the days of an effective duopoly and all the inefficiencies that brings. Remember Halifax are credit with bring down consumer fees and rates, that’s what competition does. No wonder in that context that share prices at AIB and BoI surged yesterday.

On the broader scheme, NAMA and recapitalisation may fix the domestics but at what price for competition? For the consumers and health of Irish business, why is the government (or Opposition) not attracting foreign banks like Sberbank (Russia) and ICICI (India) to set up here? Get euros for 1-2% and lend to nice Irish people and businesses at 3-6% – sounds like a licence to print money to me (and at the same time unlock the “systemic” breakdown in the existing credit markets?).

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NAMA – flesh being put on the organisational bones.

NAMA yesterday announced the senior executive management team, and good to see that someone with valuation experience is at last part of the top table in John Mulcahy – a pity the NAMA board has no such apparent property valuation experience. The senior operational team is

Separately the Indie reports that Capita (or as Britain’s Private Eye would say ‘Crapita’) are tipped to take one of NAMA’e meatier contracts to oversee NAMA loans which are still administered in the banks themselves (to recap because it gets complex, NAMA itself will administer loans relating to the top 150 borrowers, the others will still be administered by the banks,  under the apparent watchful eyes of Crapita, sorry Capita). Capita has a mixed history of performance as an outsourcer for some of the biggest companies in the UK.

€240m for the annual administration of NAMA is a princely sum, though a drop in the ocean compared with the risks and overall sums being managed. How do we know we’re getting value for money?

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