A report on special savings accounts (SSIAs) has estimated that the scheme will a positive impact on the major Irish banks, though margins could be affected.
Davy Stockbrokers estimates that the total amount of money in SSIAs - including investment returns - will be €16 billion, with about 40% of this maturing in 2006. The report says 20% of the money will be spent, while 50% of the current flow of money into the scheme will not be resaved.
Davy expects an outflow of personal desposits from the banking system over the 2006-2007 period, which will increase funding pressures and possibly affect margins. But the report says it is difficult to predict what will happen to lending, as some people could choose to pay off debts, while others could use the money to borrow more. The latter could generate extra mortgage borrowing.
Davy says the banks' life subsidiaries can look forward to a 'significant jump' in new business sales, with Bank of Ireland and Irish Life & Permanent in the strongest positions to benefit.
