By the time the Treasury Department releases its Retail Banking Review in November, the future of the sector is already clear.
IB’s decision to end cash services from 40 percent of its branches across the country is just the latest in a series of rapid changes that have hit customers over the past year and a half.
The impending departures of Ulster Bank and KBC have turned the sector upside down as hundreds of thousands of customers scramble to switch accounts to one of the remaining three domestic providers – AIB, Bank of Ireland and Permanent TSB.
Now, for a significant cohort using basic banking services like cash deposits at their local branch, either of those options looks decidedly less appealing.
So much for choice and competition. Having collected some of Ulster Bank’s better assets, including corporate loans and mortgage loans, AIB uses its virtual monopoly in the market to basically do whatever it wants.
Chief Executive Colin Hunt is doing the sensible thing. After all, moving AIB will reduce costs, and cash services are not a moneymaker for a modern bank.
But it looks bad. Ulster Bank isn’t even out the door yet and Hunt takes advantage.
There will be a small political storm but it will pass soon enough as the Dáil is on summer break. And Treasury Secretary Paschal Donohoe won’t mind anyway, since a lean and well-groomed AIB is exactly what investors want to see.
An important part of the bank review is to define a strategy for the state’s holdings in the banks.
The NTMA has almost entirely sold Bank of Ireland following a share placement plan dating back to mid-2021.
AIB is on a similar path, with a combination of opportunistic block selling and drip-feed trades slowly eroding the government’s majority stake.
Irish bank stocks have performed well in 2022, braving a global bear market, largely as market consolidation has boosted earnings prospects for survivors, notably AIB and Bank of Ireland.
But neither institution is waiting to hear what the ministry has to say about the future shape of their industry. Instead, they create it themselves.
It’s easy to see why AIB chooses this path. The cost of servicing branches, especially in remote areas, is prohibitive, so migrating customers to cashless services and remote access on a ledger makes sense.
And to be fair to the bankers, they’ve been operating in very poor conditions for years, with negative interest rates cutting into their returns. That’s why Ulster and KBC are leaving. Additionally, Irish consumers are keen not to pay fees for maintaining cash services, so it can be hard to understand when they complain about these services disappearing.
However, initial results from the Department’s public consultations and surveys show that people like having services close by and half of all Irish people are only banked. This means that many thousands of people will have their basic needs disrupted when AIB exits in the fall.
Unfortunately, the judgment of the bank audit on this matter will come too late.
https://www.independent.ie/business/aib-cuts-show-banking-review-will-report-too-late-to-matter-41853253.html AIB cuts show Banking Review will report too late to matter