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14 Mar 2019

Irish banks: An Post to launch mortgage product next year

An Post, the Irish state post office, said that it intends to enter the Irish residential mortgage market early next year, somewhat later than had been initially suggested (a likely outcome that we had suggested).  

 

An Post said that it would be launching a consumer lending product later this month that will offer personal loans of between €5,000 and €75,000 in conjunction with its banking partner Avantcard. The consumer loans will have terms of between one year and seven years, with a tiered interest rate starting at 8.5% (credit rating dependent). An Post is investing €5m in a rebrand of its financial services and e-commerce offering under the An Post Money brand.

While we recognise the distribution potential of An Post given its over 900 unit branch network across the country, we do not expect it to mount a serious challenge to either the high street banks or the credit unions (who continue to hold a significant chunk of the personal loan market) in the near term.

Irish banks: Fitch says no-deal Brexit would slow momentum

Fitch Ratings last night issued a credit update on the Irish banks ahead of any potential no-deal Brexit.

 

It comments that a hard Brexit would lead to a slowdown in business and credit growth, making revenue growth targets more difficult to achieve, and could hinder plans to reduce non-performing loans. However it believes ratings downgrades would be unlikely, at least in the near term, as current ratings already have some tolerance for weaker economic conditions built in, and that the Irish banks are reasonably well positioned to absorb the impact of weaker domestic growth that would be likely in a no-deal scenario. 

 

Fitch expects that a no-deal outcome would see Irish unemployment stable, from currently declining, while weaker economic growth would lead to lower medium-term credit growth, continuing weak demand from SMEs for longer dated loans, and mortgage demand might be more subdued (albeit still underpinned by supportive demographic and labour dynamics).

Parliament votes against no deal, but next steps still unsure  

Yesterday evening saw the House of Commons vote on the government’s motion to reject the UK leaving the European Union without a deal. The motion was initially worded to rule out a “no-deal” scenario on the 29 March. However, amendment A (Spelman/Dromey) was passed by a vote of 312-308, which rejects leaving without a deal completely. The second amendment (F) on the so called Malthouse compromise was voted down by 374 to 164. The main vote on the government motion, as amended, which ruled out ‘no deal’ entirely was passed by 321 votes to 278. However the final vote was not as straightforward as had been initially expected due to the Spelman amendment. Given the amendment, the government did an about-turn and ordered its MPs to vote against the motion, but this failed and the government was defeated with several high profile ministers ignoring the whips by abstaining (Rudd, Gauke and Clarke are believed to have abstained). Sarah Newton is also reported to have resigned after voting for it. Just to note that whilst the passing of the motion formally expresses parliament’s view that it rejects any ‘no deal’ and sends a strong statement, it is non-binding and legally does not take a ‘no deal’ scenario off the table.

 

The result may also give the PM sufficient ammunition to put more pressure on the DUP and ERG members to back her deal and withdrawal agreement in a 3rd meaningful vote expected next week (20th), although May still has to overcome a gap of 150 votes from Tuesday’s vote in order to succeed. Looking forward, the result of this evening’s vote paves the way for another vote in the House of Commons this evening on whether to request an extension of Article 50 (see Thought of the Day). 

 

Today’s Brexit vote

Following last night’s pandemonium in the Commons, we move on today to a debate (and votes) in Parliament on whether to request an extension to the Article 50 period beyond 29 March. The government’s motion has two parts;

Firstly, Parliament is asked to agree that if a deal is reached by March 20, the day before the 21-22 March EU Summit, Britain would ask for the Brexit negotiating period to be extended until June 30, just before the new European Parliament meets to allow for details to be agreed and implemented. Here May seems to be planning on holding a third “meaningful vote” in Parliament next week, presumably based on some additional legal advice from Geoffrey Cox (based on the Vienna Convention) and amidst numerous reports of talks being held with her DUP confidence and supply partner in which Mrs May is seeking to persuade them to come onside with her plan.

The second part of tonight’s motion states that if no deal was agreed by March 20, “then it is highly likely the European Council at its meeting the following day would require a clear purpose for any extension, not least to determine its length, and any extension beyond 30 June 2019 would require the United Kingdom to hold European Parliament elections in May 2019”. Here PM May is again focused on arm-twisting the Eurosceptic ERG to come on side with her plan, amidst the threat that a longer delay could bring with it a second referendum and the eventual (possible) cancellation of Brexit altogether. 

Amendments could be key

Today there are numerous amendments being made to the government’s motion which could pave the way to further chaos in Parliament this evening. There will be attempts on various fronts to move away from May’s plan as other factions in Parliament seek out other options, such as a shift to a European Economic Area and Single Market model, amidst others. Depending on developments today and PM May’s success in progressing a further “meaningful vote”, we may also see a series of indicative votes on future framework options next week. Note finally that there are wide variety of opinions across European capitals over what might be requested of the UK, in exchange for an extension, with the extension requiring a unanimous vote from EU27 countries. Votes tonight are expected to commence from 5pm onwards, and the Investec team will once again be extending the desks regular business hours to cover the fallout from the voting. 

Thought of the Day 

Chancellor's Spring statement

Amidst all of the Brexit distractions the UK Chancellor of the Exchequer Philip Hammond used his fiscal update to reiterate his well-known views on the repercussions of a disorderly departure from the EU. He also repeated that securing a deal would allow him to unleash a “double dividend” to the public finances in the three-year Spending Review (SR19) that is due alongside the Autumn Budget. In its updated projections, the Office for Budget Responsibility (OBR) highlighted that the UK economy had disappointed against its October forecast. Quarterly GDP growth was 0.2% in Q4, half the pace the OBR had expected, and was capped off by a 0.4% month-on-month contraction in December. Partly, this was attributed to the fact that Brexit-related uncertainty weighed on business investment to a greater extent than assumed. Amidst the continued Brexit wrangling, and uncertainty over Prime Minister Theresa May’s future, there are also ongoing questions over Mr Hammond’s future. His closing remarks in today’s parliamentary address, will not have found him too many friends amongst the Brexiteer wings of the Tory party as he hammered home the need to remove the “threat” of a no deal Brexit. 

Economic releases 

10.30    UK        Amendments to UK vote debated

16.00    EU        ECB’s Visco speaking

17.00    UK        Voting on extension of A.50 begins