LOW interest rates, economic growth and a general sense of optimism (oh, very well, the feel good factor) is encouraging those fortunate enough to be in secure employments. With plenty of cash swirling around bank vaults your friendly bank manager is happy to oblige before he, or she, is replaced by a computer terminal in the new millennium. Of course the raison d'etre of the beast is to shuffle money around the system at a profit.
Profit growth at both AIB and TSB Bank last year was in the order of 10 per cent, primarily due to the buoyant lending. AIB clocked up profits at the rate of over £1 million a day to £373 million, the equivalent of 46 Aer Lingus shamrocks at the present exchange rate. Group lending rose 13 per cent with £13.3 billion out on loan.
The pattern was much the same at the smaller TSB Bank where profits rose 10 per cent to £17.8 million (a mere 2.25 shamrocks) on the back of an 18 per cent growth in loan demand.
While low interest rates may be good for borrowers the banks must attract depositors to keep the money go round show on the road. Although interest rates may be near the bottom of the cycle, yesterday's cut by TSB will be followed by others, putting additional strain on margins.
Bank of Ireland, due to report in the near future, may challenge AIB for the top slot in terms of Irish banking profitability. But for AIB chief executive Tom Mulcahy size doesn't matter, profit stability does. Clearly a reference to AIB's main competitor, isn't it?.
