Guidelines on Wednesday paving the way for a return of outdoor dining next month – and indoor consumption in pubs, restaurants and cafes in July – will be welcomed by many businesses that have been locked up for months.
Others exposed to international travel, hospitality and mass gatherings will have to await the outcome of the Cabinet Covid sub-committee on Thursday and wider Cabinet the following day. But the direction is positive, aided by an acceleration in recent weeks of the vaccines rollout.
It’s inevitable, however, that many businesses will never raise their shutters again, and that the rate of loan defaults and insolvencies will spike in the second half of this year.
But the relatively good news, it seems, is that Irish banks were among the most active at setting aside provisions to cover potential losses – driven by so-called expected credit loss (ECL) models that reflect the State’s experience of the financial crisis.
Punch pessimistic economic forecasts into the system of a bank in the Republic, home to Europe’s biggest banking crisis, and you’re going to get some big loan-loss numbers.
A new analysis by international accountancy and advisory firm Mazars has found that the two Irish pillar banks took the highest ECL provisions last year relative to operating profit before the charges.
They amounted to between 186 per cent and 284 per cent of operating profit, compared to an average of 50 per cent across 26 European banks.
Mazars also said that Irish banks were also outliers in terms of loan-loss provisions relative to gross loans, at 2.3-2.8 per cent, compared to a sector average of 1.6 per cent.
"The long-term impact of the pandemic is still difficult to anticipate," said Michael Tuohy, a partner in Mazars Ireland's financial services audit and assurance unit. "The success of vaccination programmes in Europe and the recovery of sectors the most impacted by the crisis, such as hospitality, retail and aviation, will be scrutinised in the second half of 2021 to reassess the risk of credit losses on the loan portfolios of European banks."
Ulster Bank has already freed up some of the provisions it took early last year, estimating that it was too pessimistic in its macro-economic assumptions on the fallout from Covid-19. It will be a little over two months before we know where Bank of Ireland, AIB or Permanent TSB stand.