AIB saves €15m by not extending rate cut to EBS, Haven

AIB may have saved €15 million by not extending its latest variable rate mortgage cut to customers of its EBS and Haven subsidiaries.

On Monday the state-owned bank announced a reduction of 0.25 percentage points to its Standard Variable Rate (SVR) mortgages for owner occupier and buy-to-let customers.

According to John Cronin, head of financials research with Investec, AIB's rate cut will hit the bank's net income by the order of €30 million on an annual basis. However, if the bank had applied the cut to customers of its subsidiaries EBS and Haven, then the impact would have been €45 million, or more than €50 million if it had offered the rate cut to fixed mortgage rates also.

Emer Lang, analyst with Davy Stockbrokers, said that the overall impact would be "modest" on AIB's net interest margin.

While the bank’s latest rate cut only benefited the bank’s 73,000 variable rate customers, and did not extend to customers of either EBS or Haven, AIB has not ruled out a similar offer.

“Our mortgage offerings will continue to evolve and we will be introducing more new features across our other brands over the coming months to further benefit customers

Deposit trends

Meanwhile, Davy Stockbrokers suggests that Irish deposit rates could fall further, noting there could be “some room for manoeuvre on deposit rates”, adding that “Bank of Ireland’s recent IMS revealed that it was carrying surplus liquidity, making it easier to nudge rates lower”.

Research from the European Central Bank last week showed that Irish savers are stuck with the worst deposit rates in Europe.

Rachel Doyle, chief operations officer at PIBA, said that while rate cuts from the banks are welcome, she notes that it is still far off what could be considered fair to Irish consumers, given the extremely low cost of borrowing for banks and that on the other side of the equation, savings, Irish consumers are not getting any benefits either.

“The traditional norms in banking are pretty much gone, where when borrowers were paying higher rates savers benefited, but neither side is working in favour of consumers now,” she said.