BANK OF SCOTLAND IRELAND PREDICTS TOUGH TIMES AHEAD - Results this morning for the first six months of the year from Bank of Scotland Ireland show that underlying profit before tax in Ireland increased by 6% to £85m sterling. The figures are for the Irish operation of HBOS, and include the relatively new Halifax bank here, which has 42 branches now. Overall loan growth was 17%, but deposit growth was slower in the six months to June.
Bank of Scotland Ireland's chief executive Mark Duffy says today's results are good as they are set against a very difficult set of economic circumstances for the bank and its customers. He says the bank's success here is due to the amount of Irish consumers switching from their old banks to Halifax, while the bank continues to focus on small Irish businesses. Because of the recent arrival of its retail operations, BoS Ireland has managed to miss many of the 'excessives' evident within the banking industry at present. He warns that the next six to 12 months will be very difficult for customers but says the bank continues to see strong, economic underlying fundamentals supporting its growth.
Mr Duffy says the increase in impaired loans must be looked at against the backdrop of very, very low figures for the last number of years. But he predicts that a tough winter lies ahead for the bank's customers - and says that the bank will stick by them.
Refusing to comment on speculation that the bank's UK parent, HBOS, may be taken over, Mr Duffy says that Bank of Scotland Ireland continues to invest here and continues to recruit staff, when many competitors are not. He says the bank believes that Ireland is a very successful place in which to do business.
He says the credit crunch is throwing scenarios at banks worldwide which have never been witnessed before. Commenting on the fact that the bank has stopped lending for buy-to-let deals, he says it is a prudent, temporary decision and the bank makes such decisions as the market determines.
Mr Duffy says that because of the negative economic sentiment, both house purchasers and vendors are holding off on deals. He says he predicts a further decline of between 5-10% towards the end of the year. He adds, though, that by the end of the year, the market should have bottomed out.
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MORNING BRIEFS - Government figures on housing just released by the Department of the Environment show that in the first three months of this year the price of a second hand home in Dublin fell by 10.4%, compared with the first three months of 2007. Nationally the fall for second hand homes was 5.4%, and new homes fell by 3%. Prices in Galway increased by over 4%. The department's figures show a steep decline in number of houses built and started in the first three months of the year, and mortgage approvals were down almost 40%.
*** In the UK, one in seven households could find their mortgage is more than the price of their home next year, according to Standard & Poor's. S&P said properties with negative equity were likely to be worth 8% less than their mortgages on average, with the problem more prevalent in the Midlands and north of England.
*** Northern Rock says it expects to make about 1,300 staff redundant - fewer than it previously expected - as part of its restructuring plans. It hopes to limit the number of compulsory redundancies to 800, while 500 staff will leave voluntarily. The bank said it expects to be left with an estimated 4,000 staff. Northern Rock was nationalised at the beginning of this year after it was hit by a shortage of funds as a result of the credit crunch.
*** Oil rose more than $4 a barrel yesterday after US government data showed an unexpected drop in petrol stocks as suppliers facing weak consumer demand cut production and imports. Oil hit almost $127 a barrel, after dropping to $120 earlier this week, its lowest point since the beginning of May.
*** On the currency markets the euro is trading at $1.5586 cents and 78.69 pence sterling.
