Great news for consumers, businesses and the economy.
Not so good for existing Irish banks and non-bank lenders.
That’s how today’s announcement that Spanish lender Bankinter intends to enter the Irish market in a more meaningful way has been interpreted.
After years of talking about international banks leaving the market, news of the arrival of a new one is a big boost for consumers desperate for more competition.
The fifth biggest lender in Spain and among Europe’s top-50, Bankinter has been here since 2019, when it bought Avant Card.
It is already well established in the credit card and personal loan market.
That proved a good base for Bankinter to work off and it subsequently renamed it Avant Money, began offering mortgages and rapidly grew its market share through offering very competitive rates.
Today it has a lending book of €3.3 billion, 200,000 customers and made a profit of €9m in the first three months of the year.
But now Bankinter plans to take things a step further, by formally opening a branch of the bank here, through Avant Money.
The structural changes will enable it to offer a far wider suite of services, beginning initially with deposit products.
Rather than applying for a specific banking licence from the Central Bank of Ireland, it plans to use EU financial services passporting rules which allow it to offer full services in member states under its existing Spanish and ECB licences.
While the development involves the setting up of a branch here, that is only in the technical sense.
It won’t be going down the road of opening a costly network of physical branches for customers to bank in – those days are gone.
Instead, services will be offered through online and digital channels.
It won’t be rebranding for now either – the Avant Money name has recognition and for the moment at least it will stay.
Bankinter didn’t give any reasons for why it is expanding beyond Spain, Portugal and Luxembourg.
But clearly the barriers of entry previously identified around the Irish market are not a concern and because it wasn’t operating here during the financial crash, it won’t be weighed down with the burden of legacy capital requirements that the other long-time lenders here face.
The news is welcome on many fronts.
First, consumers and businesses will see increased competition, which should help lower interest rates on loans, lead to higher deposit rate offerings and improve customer service across the sector.
The Competition and Consumer Protection Commission has previously pointed to the risks of increased market concentration following the exits of Ulster Bank and KBC Bank Ireland, which it said would leave certain consumer and business segments with little choice for a range of products.
“The lack of competition in the Irish banking market is widely acknowledged, with the three pillar banks holding 90% of new mortgage lending,” commented Rachel McGovern, Director of Financial Services at Brokers Ireland.
“And if Bankinter is about to start with the deposit side of banking then they are going right to where most fat lies, with Irish people having over €150 billion on deposit, mostly in low yielding accounts, among the weakest rates in Europe,” she said.
Second, it will be good for those working in the sector, which has seen considerable job losses in recent years with the departures of the foreign lenders, the closure of branches in those remaining banks and consolidation of certain activities.
The expectation is that as it grows, Bankinter will take on more staff, providing welcome new employment, particularly in the northwest, where it has the main centre of its Avant Money operations in Carrick-on-Shannon in Co Leitrim.
Third, it should be good for the economy, helping to increase the flow of credit to those that need it, but hopefully are more competitive rates.
It may also help to bring in other new entrants.
“I expect the Irish economy will continue to grow over the coming years,” the Minister for Finance Michael McGrath said.
“Our labour market is strong and our public finances are in good health. We are home to many of the world’s largest companies and we are continuing to win international investment. I am pleased that Bankinter recognises the attractiveness of the Irish market,” he added.
And finally, while they might not like the arrival of a new entrant to eat their lunch, the challenge provided by Bankinter will force incumbent lenders, AIB, Bank of Ireland, PTSB and the non-bank lenders to remain focused, lean and innovative, which in the long run will be good for their businesses too.
“Given the dramatic changes which the banking industry in Ireland has undergone in recent years with the loss of two retail banks, BPFI very much welcomes today’s announcement in respect of Avant Monet,” Banking and Payments Federation Ireland said today.
“The entry to the market of any new player is a positive development allowing for greater competition and choice for consumers and businesses,” BPFI added.
Let’s hope it does.
ENDS