By the time the Department of Finance’s Retail Banking Review is published in November, the future of the sector will have already been decided.
IB’s decision to withdraw cash services from 40pc of its branches around the country is only the latest in a series of rapid-fire changes to hit customers in the last year and a half.
The pending departures of Ulster Bank and KBC have turned the sector on its head, with hundreds of thousands of customers scrambling to switch accounts to one of the remaining three domestic providers – AIB, Bank of Ireland and Permanent TSB.
Now one of those options is looking decidedly less attractive for a significant cohort who use basic banking services like cash deposits at their local branch.
So much for choice and competition. Having gathered some of the better assets from Ulster Bank, including corporate loans and performing mortgages, AIB is leveraging its quasi-monopoly power in the market to do basically what it wants.
Chief executive Colin Hunt is doing the rational thing. After all, AIB’s move will cut costs and cash services aren’t a moneymaker for a modern bank.
But it’s a bad look. Ulster Bank isn’t even out the door yet and Hunt is pressing his advantage.
There will be a minor political storm, but it will blow over soon enough as the Dáil is in recess for the summer. And Finance Minister Paschal Donohoe won’t mind weathering it anyway, as a lean and trim AIB is exactly what he wants investors to see.
A key part of the banking review is to set out a strategy for the State’s shareholdings in the banks.
The NTMA has nearly completely sold out of Bank of Ireland following a share placement plan going back to mid-2021.
AIB is on a similar path, with a combination of opportunistic block sales and drip-feed trades slowly chipping away at the Government’s majority stake.
Irish bank shares have performed well in 2022, defying a global bear market, largely because the market consolidation has improved the profit outlook for the survivors, especially AIB and Bank of Ireland.
But neither institution is waiting around to hear what the Department has to say about the future shape of their industry. Instead, they are shaping it themselves.
It’s easy to see why AIB is choosing this path. The cost of servicing branches, especially in remote areas, is prohibitive, so migrating customers to cashless services and remote access makes sense on a ledger.
And in fairness to the bankers, they’ve been operating under very poor conditions for years with negative rates eating into their returns. That’s why Ulster and KBC are leaving. Moreover, Irish consumers emphatically do not want to pay charges to keep cash services, so it can be hard to sympathise when they complain that those services are disappearing.
But early results from the Department’s public consultations and surveys reveal that people like having services nearby and half of all Irish people have just one banking relationship. That means many thousands of people are going to have their basic needs disrupted when AIB pulls out in the autumn.
Unfortunately, whatever verdict the banking review might render on this state of affairs will come too late.
