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Arrival of first overseas bank since Celtic Tiger a ‘win’ for consumers

Bankinter decision to target savings rates will be welcomed by Irish customers who largely have their money in ‘on demand’ accounts offering paltry returns

Bankinter's decision to expand its Irish business is a welcome move for Irish bank customers. Photograph: iStock
Bankinter's decision to expand its Irish business is a welcome move for Irish bank customers. Photograph: iStock
Joe Brennan
Sat Apr 27 2024 - 02:00

The decision by Spain’s fifth-largest bank to enter the Irish market has been hailed as a much-needed boost for competition, following a slew of bank exits over the past decade and a half.

Bankinter, which already has a €3.3 billion Irish mortgage and consumer finance book built up over the past five years, confirmed on Friday it plans to turn its Irish unit Avant Money into a branch of the parent bank to expand the range of products it offers customers in Ireland.

The focus will initially be on deposits, an area where existing Irish banks have lagged behind European rivals in passing on European Central Bank rate hikes in recent years.

The average Irish rate on on-demand deposits and current accounts, which make up more than 90 per cent of banks’ deposit base, stood at 0.13 per cent at the end of February – a third of the euro zone average, according to Central Bank data.

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The average new rate for deposits that households have agreed to lock away for a set period was 2.59 per cent in February, compared to 3.17 per cent for the wider euro zone.

“Today’s announcement is significant for the Irish banking market, and is very welcome news for households, businesses and consumers, who are the real winners from increased competition,” said Minister for Finance Michael McGrath.

Bankinter’s plans were first reported by The Irish Times online on Friday.

Rachel McGovern, director of financial services at Brokers Ireland, said the lack of competition in the Irish banking market was widely acknowledged and highlighted by the fact that the three remaining domestic banks are currently responsible for 90 per cent of new mortgage lending.

“If Bankinter is about to start with the deposit side of banking, they are going right to where most fat lies, with Irish people having over €150 billion on deposit, mostly in low yielding accounts, [which are] among the weakest rates in Europe,” Ms McGovern said. “A new competitive force in the market augurs well, both in terms of interest rates and in terms of product offerings.”

Avant Money shook up the domestic mortgage market in late 2020 when it launched fixed-term home loans priced at as low as 1.95 per cent, undercutting the cheapest home loans at the time. It has since built up a €2.4 billion mortgage portfolio.

Bankinter is the first traditional lender from overseas to move to enter the Irish retail banking market since March 2005, when Bank of Scotland moved to buy 52 former ESB outlets to set up a boots-on-the-ground banking operation, and Copenhagen-based Danske Bank took over National Irish Bank.

Bank of Scotland (Ireland) handed back its licence in 2010 as a result of the financial crash, while Danske Ireland exited the Irish retail market in 2013. The final two overseas banks in the market, Ulster Bank and KBC Bank Ireland, decided three years ago to wind down.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times