What would it take for a bank or building society to go under here? I am asking this question because I expect to see a run on banks this coming week in the US. Could the same thing happen in Ireland?
They're all supposed to be in decent shape here, but it's the nature of the business for them to have a lot of their money tied up in loans and investments. A run on any of them would put them in a bad way. It's a bit like a bomb scare in a stadium - the measures in place to account for problems won't hold if everyone panics.Originally Posted by Noelys Guitar
Field an eL team?
The Model Club
Tell all the Bohs you know
that we've gone and won two-in-a-row
and it's not gonna be three
and it's not gonna be four
it's more likely to be 5-1.
Irish banks are the richest, most profitable in the World.
Been ripping us all off for thirty years.
Shower of cnuts I hope they lose their ballacks.
"Football is a game you play with your brain".
And let Roddy Collins manage it
You show me a good loser and I'll show you a loser - Vince Lombardi
Bank shares have been taking a hammering lately but heard nothing about insolvency.
Banks make huge profits because two of them control 80% of the market.
Some of them a fairly exposed to buy to let investors, as reflected in the share price drops. I wouldn't necessarily talk them down, but I don't think everything is entirely rosie either. Sure it only takes people to start selling their shares to spark a run - could easily happen as dealers are the spawn of the devil and will do anything for a profit.
If you attack me with stupidity, I'll be forced to defend myself with sarcasm.
Buy to let investors aren't where banks and Building societies have gone wrong. The vast majority have fairly decent deposits on their properties (10-15%+ ), and so long as rent is more than their mortgage they've no need to sell. Mortgages have been going up, but so have rents as no-one is buying.
The only BTL ones suffering are the gullible fools who bought new build stock - especially through property clubs. New build has been widely known as a corrupt market for years, so I have limited sympathy for anyone who invested in these without doing their homework.
It's the owner-occupiers who were borrowing 95%, 100%+ of a property's value who are the ones who are shafting banks. They clearly don't have the income to enable them to put down a decent deposit, so are also unlikely to have the income to take a large increase in mortgage payments either. Unlike the BTL investors, owner-occupiers don't have an increasing income to cover these increasing mortgage costs.
But rents are falling*, and they are still hit with the same interest rate rises? I also think you're over estimating the probity of the lending to the buy to let market as well.
*http://www.rte.ie/business/2008/0520/daft.html
If you attack me with stupidity, I'll be forced to defend myself with sarcasm.
Sorry Macy - I should've caveated the above as only reflecting the experience in Britain.
I don't work in Ireland, so don't know the deal re rents there.
No longer true Pete. In many sectors there is very healthy competition by Danske (NIB) and Halifax in the consumer market and Anglo in the commercial market.
A run on the bank is not caused by share price (if it was, it would likely be happening already as the big 4 Irish banks shares are down 65-80%, in the space of just over a year). Its caused by fear that deposits aren't safe.
Negative equity is an technical irrelevance until people can't pay their mortgages (with unemployment and interest rates being the two main drivers of this). If Euribor rates don't go up any more, then defaults and repossessions will be manageable (but still up significantly on very, very low instances in the past). If rates continue to rise, all bets are off and it could get v ugly.
Where Irish banks are very exposed is in property development and investment. This is whats causing the sell off in stocks and the outlook here, is frankly awful. Developers, builders and hoteliers are going under daily and lenders that do business in the UK are unlikely to escape as the residential and commercial property investment and development markets there are tanking as well.
US has a very different banking sector, with a lot of small Savings & Loans still having a lot of market share. They suffered a catastrophe a few decades ago and could do again.
I would predict that only 2 of the big 4 Irish owned banks will be around in 2 years. I don't think they'll go under, a takeover is more likely.
Due to tax schemes Ireland has a huge amount of 5 star hotels per capita. Apparently business is down a lot & some slashing prices. Heard one Manager on the radio a couple of months ago saying he would not reduce prices but adding more value to the packages as allows him to drop the perks if the good times return. If anyone has a few million lying around might be able to find yourself hotels going cheap soon...
I thought a plummeting share price could spark it, but maybe I'm getting that the wrong way round (i.e. the fear sparks the share price drop rather than the share price drop sparking the fear).
If you attack me with stupidity, I'll be forced to defend myself with sarcasm.
Apparently the number of 4 star hotels has increased from 15 to 87 in the last 10 years. Most on tax schemes as you have said. Completely unsustainable. I played golf at a place called Knightsbrook in Trim a few weeks back. Nice place, but who wants to go to a 4 star spa/golf hotel in the middle of a housing estate in feckin Trim?!?! Schemes like this are replicated around the country.
Probably the biggest driver of share prices of banks is expectation of future earnings and the impact on dividends. So a fear of liquidity problems would lead to a share price decline. This is what happened when the rumours were spread about Anglo Irish and HBOS a few months back.
Northern Rock was a watershed in term of government support for banks as it pretty much established a precedent for banks stepping in to guarantee all deposits (not just those guaranteed by deposit guarantee schemes).
The average Seamus in the street hasn't got the first notion of what the share price of their bank is.
Do you know yours...?
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