Deposit flight from Irish banks still ongoing but apparently slowing

The Central Bank of Ireland (CBI) has today issued its monthly financial data for banks operating in Ireland. The headline with respect to deposits is that money is still disappearing from our banking sector, at a reduced rate compared with the end of 2010 but still at a level that should be of concern and which equals the average monthly decline for the past tumultuous year. Here are the latest deposit figures for the 20 financial institutions which serve the domestic economy. The information is sourced from the CBI’s Table A.4.1

And here are the latest deposit figures for all Irish financial institutions including those operating in our Irish Financial Services Centre (IFSC), many of which don’t serve the domestic economy. The information is sourced from the CBI’s Table A.4

(1) Monetary Financial Institutions (MFIs) refers to credit institutions, as defined in Community Law, money market funds, and other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs, and, for their own account (at least in economic terms), to grant credits and/or to make investments in securities. Since January 2009, credit institutions include Credit Unions as regulated by the Registrar of Credit Unions. Under ESA 95, the Eurosystem (including the Central Bank of Ireland) and other non-euro area national central banks are included in the MFI institutional sector. In the tables presented here, however, central banks are not included in the loans and deposits series with respect to MFI counterparties.

(2) NR Euro are Non-Resident European depositors

(3) NR Row are Non-Resident Rest of World depositors (ie outside Europe)

As examined in a previous entry on here, there are difficulties in analysing data because the CBI produces much-aggregated figures but here are what I believe to be the relevant headlines.

(1) Deposits by the Irish private sector (households and businesses) in the 20 domestic financial institutions fell by €1.5bn in January, 2011 (€19.6bn is the annual decline and the previous months decline was €3.3bn). It is likely that the decline in deposits will be filled with emergency liquidity assistance from the CBI or extraordinary measures by the ECB.

(2) Total deposits by all sources in the 20 domestic financial institutions fell by €19.9bn in January 2011 (€134.6bn is the annual decline and the previous month’s decline was €40.3bn).

Although the rate of decline in deposits slowed in January, 2011 bear in mind that the deposit information does not allow us to examine the position of the six State guaranteed banks in relation to other “foreign” banks which serve the domestic economy like KBC, Nationwide UK, Rabo, NIB and Ulsterbank. It should be said that the Bank of Ireland financial update a week ago and the IMF Staff Report at the start of February 2011 both claimed that deposit flight had moderated and that deposit levels were stabilising.

UPDATE: 28th February, 2011. The CBI has for the first time produced information on the subset of the 20 domestic financial institutions covered by the State guarantee, that is AIB, Anglo,  Bank of Ireland, EBS, Irish Life and Permanent and INBS. Firstly there’s a draft consolidated balance sheet:

And secondly there is a new table A.4.2 from which the following information is extracted:

On the face of it, it appears that deposits continue to flee at an elevated level and the January 2011 declines were above the average monthly decline for the previous 12 months. The information contained in the new table is being analysed and there will be further comment here later ..

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Mortgage market freezes up in Q4, 2010

The Irish Banking Federation has this morning published its lending statistics for mortgages for Q4, 2010 and they show that transactions are grinding to a halt. Just 4,024 mortgages were advanced during the quarter for the purchase of property. This is down 87% from peak in 2006 when over 30,000 mortgages were advanced for property purchase in one quarter, but perhaps more importantly down 21% from the previous quarter three, 2010. The number of all new mortgage lending including top-ups and remortgages stood at 5,624 down 90% from peak and 23% from the previous quarter.

The euro amount advanced during the quarter has also fallen off a cliff with the total being 94% off peak 21% off the previous quarter. Just €805m was advanced for property purchases, down from almost €8bn in 2006.

The average sum advanced continues to bear up despite the fall-off in transactions and the average 39% decline in property values since the peak at the start of 2007. The average advanced for a first time buyer mortgage during Q4, 2010 was €185,000 down just 13% from peak and 2% from the previous quarter. The average mortgage for movers was €225,000 down just 5% from peak and 4% from the previous quarter. Average buy to let mortgages at €189,000 are down 29% from peak but up 12% from the previous quarter. Average top-ups and remortgages are also up on the previous quarter. It should be noted that lending criteria have sharply tightened since the peak with mortgage providers typically seeking 75% loan to values when advancing mortgages, down from a not-unusual 100% at the peak.

Commenting on the latest figures this morning, the long-standing IBF chief executive Pat Farrell said “Against a very challenging economic background it can come as little surprise that mortgage market activity remains weak.  The impact of the last Budget on consumer spending, the reduced level of consumer confidence during Q4 2010as reflected in the 44.4 low recorded in December in the KBC Ireland/ESRI Consumer Sentiment Index and continuing uncertainty around future employment prospects are among the factors that have made manageable borrowing and prudent lending an ongoing challenge”

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Mortgage arrears up 56% year-on-year, repossessions stable

Although Charlie Weston at the Independent said that the information would be published by the Fianna Fail appointed Financial Regulator last week, it is only today that the arrears/repossession information for Q4, 2010 has been published. Here’s the summary together with data for previous quarters.

(Click to enlarge)

In summary, arrears are up by 10% from Q3, 2010 which is down very slightly from the 11% rise in arrears between Q2 and Q3, 2010. Arrears over 180 days are up 12% quarter upon quarter. Overall arrears are up 56% on Q4, 2009. In addition to arrears, the Financial Regulator has reported for the first time that some 35,205 mortgages have been restructured and are performing. We do not have up to date information on mortgage interest social welfare payments. But overall we can see that 5.7% of mortgages are in arrears and 10.1% are in arrears/restructured. The last estimate I saw of social welfare payments of mortgages was at 16,000 which if still current might indicate some 12% of mortgages experiencing some difficulty.

Repossessions remain low at 106 for Q4, 2010. Ireland’s repossession rate is incredibly low given its 13.4% unemployment rate, the average 39% drop from peak in house prices, interest rate rises and generally challenging economic conditions.

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NAMA oversees second significant domestic property sale

(UPDATE: 2nd March 2011. It seems that NAMA may not have had involvement with this sale even though it relates to a property owned by a Liam Carroll company. It is suggested that the lender may have been the Bank of Scotland Ireland which of course is not a NAMA Participating Institution)

On 13th January, 2011 on the fringes of his re-appearance before the Oireachtas Committee of Public Accounts, the NAMA CEO Brendan McDonagh announced that he expected to see “two or three sales” worth in the order of €200m by the end of March 2011. And further, NAMA was in advanced talks with overseas buyers for two of the properties; a domestic buyer was expected for the third property.

Since then we have had the announcement of the sale of the Montevetro building on Barrow Street to internet giant Google (sale #1, foreign buyer). And yesterday Gavin Daly in the Sunday Business Post claimed that Google had bought its existing site on Barrow Street, Gordon House for €125m (if the report is correct, sale #2, foreign buyer). The Gordon House complex is reported to have 200,000 sq ft which would mean the purchase price of €625 psf was at quite a premium to the purchase of Montevetro (€476 psf) which in itself was at a premium to the sale of 20,000 sq ft at €283 psf at the start of February, 2011 on Anne Street (500 metres away) in a more traditionally prestigious building though with a dated interior. The sale would mean that Google held more than 400,000 sq ft of accommodation on Barrow Street.

Given that both the Fine Gael and Labour parties have committed to retrospectively examining commercial rents, you can only admire the confidence Google is expressing in the long term prospects for the country as it would appear to be paying in excess of current market prices, particularly in light of retrospective rent reviews.

With this latest sale, Google would appear to have spent €225m on two commercial transactions which are individually the biggest here for several years – way down from the €250m+ blockbuster deals during the boom but significant in today’s market. However the transactions pale into relative insignificance alongside Google’s purchase of the 2.9m sq ft 111 Eight Avenue building in New York at the end of last year. The purchase price was reported to be USD $1.8bn (€1.5bn or €530/psf).

The Gordon House complex is owned by companies in the Liam Carroll group and it is understood that the reported transaction has been effected under NAMA’s auspices. In addition to the €300m sale of 20, Grosvenor Square first reported on here last week, NAMA is certainly well on its way to equalling last year’s tally of €1.6bn of sales but quite soon NAMA is going to have to confront its massive portfolio of less prime property, the low-hanging fruit is disappearing.

So, going back to Brendan McDonagh’s statement in January, we would appear to have had two sales to foreign buyers – will the third sale to the domestic buyer materialise before the end of March?

UPDATE: 2nd March, 2011. Reporting on the above transaction in today’s Irish Times, Jack Fagan omits any mention of NAMA and claims the loan underpinning the complex (Gordon House and Gasworks House) belong to Bank of Scotland Ireland which of course is not a NAMA Participating Institution. Jack is also claiming that the price is “slightly over €100m” which implies that it is not €125m. Jack’s reporting has the feel of being correct as he cites details such as the sale being handled by the receiver David Hughes of Ernst and Young and that Google were paying €8m per annum (equivalent to €40 psf by the way) for the two buildings with 10 years remaining on their leases. Jack reports that the price paid by Google for the two buildings is “considered on the strong side” – at close to €500 psf and with an incoming administration likely to put through legislation to allow retrospective reviews that may be an understatement. Still you’d have to ask where Gavin Daly at the Sunday Business Post got the information to lead him to write “The transaction is also thought to involve the National Asset Management Agency (Nama), which acquired Carroll’s property loans last year.”

UPDATE: 8th March, 2011. There is unconfirmed speculation that in addition to the commercial property acquisitions, Google has been buying residential real estate closeby to its offices. There is speculation that Google is acquiring 25 apartments in Liam Carroll’s Gasworks building, understood to have been developed by Fabrizia Developments.

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