EBS considers pulling back from savings products to focus on mortgages

AIB-owned unit is undertaking a strategic review

AIB’s EBS unit is weighing pulling back on its savings and current account products and relying more on funding from its parent, as it seeks to narrow its focus to its mortgages business, according to sources.

The consideration is part of a strategic review being undertaken at the former building society, which was taken over by AIB under government orders in 2011, at the height of the financial crisis.

At the end of 2020, EBS had €5.39 billion of retail deposits, the equivalent to about 47 per cent of its €11.3 billion loan book, which was almost entirely comprised of residential mortgages. The lender was also relying on €4.52 billion of deposit funding from AIB as of that date.

The move by EBS, led by managing director Paul Butler, to consider pulling back from customer deposit funding comes at a time when the AIB group – and wider Irish banking system – is grappling with excess deposits.

Most savers with EBS are being offered zero interest, while AIB is in the process of widening the net of customers that are being charged negative interest rates, as it shares the pain of the European Central Bank (ECB) imposing negative rates on excess deposits banks store with it.

A spokesman for EBS said the company is “undergoing a number of strategic changes that build on the current proposition”, and that it would notify customers of any developments in its services.

“In the rapidly changing banking environment, EBS continues to invest in its digital capability, distribution network and customer proposition in order to support a growing number of customers seeking to buy a home,” he said.

There are some 360 people employed across EBS’s network of 68 offices, including locations run as tied agents. The spokesman declined to comment on potential implications for these as the lender continues its review.

Move deposits

It is expected that EBS savers will be offered an easy opportunity to move their deposits to AIB in the event that it decides to retreat from savings products.

RTÉ first reported on Wednesday morning that EBS was carrying out a review of its operations.

The review is also coming at a time when the wider Irish banking market is bracing itself for a deluge of tens of thousands of Ulster Bank personal and business account holders searching for new homes for their money as the UK-owned lender withdraws from the market.

Ulster Bank, which had €21.6 billion of customer deposits at the end of last June, committed publicly at the end of October to providing customers with six months’ notice to close their accounts from 2022. It is expected that this will start in February on a phased basis.