Category Archives: Banking

2/10/20: A new mortgage arrears crisis on its way

 

My latest article on Irish banking sector problems with distressed mortgages is out today in The Currency

There’s a new mortgage arrears crisis on its way, and official Ireland is not ready for it

The Central Bank of Ireland has started publishing new data on mortgage arrears – and the news is not good. An arrears crisis is brewing. The banks, and the state, are woefully unprepared for it.

https://thecurrency.news/articles/24779/theres-a-new-mortgage-arrears-crisis-on-its-way-and-official-ireland-is-not-ready-for-it/ 



1/6/20: COVID19 and European Banking


McKinsey research note on European banks' potential losses due to COVID19 is quite on the money:


With more than 1/3rd of European executives expecting "a muted recovery that would lead to sharp drops in banks’ revenue, a squeeze on their capital, and a hit on return on equity", European banks can expect revenues to drop by 40 percent plus, and ROE drop 11 percentage points in 2021.

And the problems are strategic. COVID19 is actually accelerating changes in customers' demand for services. "McKinsey’s European customer survey shows how customer behavior and needs have changed over the past month: digital engagement levels have climbed up to 20 percent, the use of cash has halved, 30 to 40 percent of customers have expressed a greater need for advice, while 20 to 40 percent want products to help them through the crisis.4 Pension shortfalls are a particular challenge with those close to retirement facing a very immediate problem."

Alas, European banks, especially those operating in the 2008-2014 crises-hit economies, such as Ireland, Italy, Spain and Portugal, are utterly unprepared for these shifting trends. I wrote about these problems in a series of two article for The Currency here: https://www.thecurrency.news/articles/4810/a-catalyst-for-underperformance-how-systemic-risk-and-strategic-failures-are-eroding-the-performance-of-the-irish-banks and https://www.thecurrency.news/articles/3833/culture-wars-and-poor-financial-performance-just-what-is-going-on-within-irelands-beleaguered-banks.

8/1/20: Creative destruction and consumer credit


My new article for @TheCurrency_, titled "Creative destruction and consumer credit: A Fintech song for the Irish banks" is out. Link: https://www.thecurrency.news/articles/6150/creative-destruction-and-consumer-credit-fintech-song-for-the-irish-banks.

Key takeaways: Irish banks need to embrace the trend toward higher degree of automation in management of clients' services and accounts, opening up the sector to fintech solutions rather than waiting for them to eat the banks' lunch. Currently, no Irish bank is on-track to deploy meaningful fintech solutions. The impetus for change is more than the traditional competitive pressures from the technology curve. One of the key drivers for fintech solutions is also a threat to the banks' traditional model of business: reliance on short-term household credit as a driver of  profit margins.

"Irish banks are simply unprepared to face these challenges. Looking across the IT infrastructure landscape for the banking sector in Ireland, one encounters a series of large-scale IT systems failures across virtually all major banking institutions here. These failures are linked to the legacy of the banks’ operating systems."

"In terms of technological services innovation frontier, Irish banks are still trading in a world where basic on-line and mobile banking is barely functioning and requires a push against consumers’ will by the cost-cutting banks and supportive regulators. To expect Irish banking behemoths to outcompete international fintech solutions providers is equivalent to betting on a tortoise getting to the Olympic podium in a 10K race."