Bankinter, Spain’s fifth-largest bank, has been applauded for its venture into Ireland’s banking industry, a move seen as a competitive stimulant amidst the steady departure of banks in the past 15 years. With an existing €3.3 billion Irish mortgage and consumer financial portfolio accumulated over 5 years, Bankinter disclosed its intention to augment its Irish subsidiary Avant Money into a branch of the parent bank, extending its product offering to Irish clients.
The initial concentration will be centred on deposit accounts, a segment where existing Irish financial institutions have been lacklustre in reflecting European Central Bank rate increases compared to their European counterparts in recent years. The prevailing Irish rate on on-demand savings and current accounts, which represent over 90% of banks’ deposit base, was 0.13% as of last February— a third of the euro zone average from data provided by the Central Bank.
As of the same month, the typical new rate for time-specific deposits households agreed on was 2.59%, compared to 3.17% for the wider euro zone. According to Michael McGrath, the Minister for Finance, the announcement heralds promising news for households, businesses, and consumers— the real beneficiaries of heightened competition.
Rachel McGovern, the director of financial services at Brokers Ireland, emphasised that the lack of competition in the Irish banking market, illustrated by the three remaining domestic banks presently accountable for 90% of fresh mortgage lending, is an accepted fact.
“With Irish individuals having over €150 billion in deposits, primarily in low-yielding accounts, which have some of the lowest rates in Europe, Bankinter’s decision to embark with the deposit aspect of banking is a wise move,” Ms McGovern stated. She also declared that the entrance of a competitive contender augurs well for interest rates and product offerings. In late 2020, Avant Money disrupted the national mortgage market with the introduction of fixed-term home mortgages starting at rates as low as 1.95%, outdoing the most affordable home loans at that time whilst subsequently amassing a €2.4 billion mortgage portfolio.
For the first time since March 2005, Bankinter has become the first traditional foreign bank to endeavour entering the Irish retail banking industry. This comes after similar moves by Bank of Scotland, which acquired 52 ex-ESB branches to initiate a physical banking presence, and Danske Bank from Copenhagen, which procured National Irish Bank.
Due to the financial crisis, the Bank of Scotland (Ireland) relinquished its license in 2010, and Danske Ireland withdrew from the Irish retail market in 2013. Over the last three years, the remaining two foreign banks in the market, Ulster Bank and KBC Bank Ireland, also elected to cease operations.