Coronavirus: Irish banks offer relief to borrowers hit by coronavirus

Goldman Sachs sees coronavirus fallout wiping €30bn off European banks’ profits

Ulster Bank’s parent RBS is to give customers a mortgage holiday.

Ulster Bank’s parent RBS is to give customers a mortgage holiday.

 

Banks in the Republic said they will offer relief, including short payment holidays on mortgage payments, to customers that find themselves in financial distress as a result of the fast-spreading coronavirus.

The development comes as analysts at leading Wall Street bank Goldman Sachs warned on Tuesday that the fallout from the disease could hit European lenders’ profits to the tune of €30 billion over the coming years.

Bank of Ireland said personal customers affected by Covid-19 will be allowed up to three-month payment breaks or flexible arrangements on home and other loans. Businesses will be able to avail of emergency working capital, payment flexibility on borrowings and trade finance for those sourcing products from new suppliers internationally as the virus plays havoc on supply chains.

Situation

AIB, the country’s largest mortgage lender, highlighted it already offers borrowers a break on mortgage repayments for up to six months and interest-only periods for as many as 12 months in certain circumstances.

“We have assessed the supports in the context of the evolving situation around Covid-19 and are evaluating potential scenarios which our customers might encounter,” said a spokesman for the bank, adding that the bank is assuring customers that it “will use these measures to support customers in line with the particular circumstances the customer finds themselves”.

Ulster Bank said it will consider mortgage and loan repayment breaks for up to three months and increases in overdraft and credit card limits. It also announced a €500 million fund to provide small-to medium-sized enterprises (SMEs)of working capital to help deal with disruptions from falling demand, increasing costs and supply chain disruptions.

Permanent TSB is keeping its support measures for to customers in financial difficulty under review, in case “any further measures need to be put in place to support our customers as a result of the impact of Covid-19”, a spokeswoman for the lender said.

KBC Bank Ireland said it had a “range of solutions” for customers that find themselves in financial difficulty.

Slump

“Most individuals in the economy are on salaries, so are unlikely to be impacted in our view, so it will be mostly individuals in the gig economy or the self-employed – more likely in the S or very small S part of SMEs – that will require support,” said Eamonn Hughes, an analyst with Goodbody Stockbrokers, noting that travel, leisure or hospitality sectors are most at risk among businesses.

He said that the recent slump in bank prices reflects fears of a “protracted and fundamental downturn” as the world deals with the virus.

Meanwhile, Italy’s deputy finance minister Laura Castelli said that the Rome government is in talks with the country’s banks to provide breaks from mortgage, personal and business loan payments, after the country went into lockdown to contain the virus.

European banks face €30 billion being wiped from their net profits over the next three years as they deal with the fallout from Covid-19, according to analysts Goldman Sachs. This will be driven by increased bad loans, weaker revenue and broadly flat costs, the analysts said on Monday.

Still, the analysts said that European banks’ financial standings are in a “stronger position than at any point over the past decade”, leaving them better positioned to cope with the coronavirus crisis.