Friday, August 20, 2010

Economics 20/8/10: BOSI lessons

Some impressive numbers from BOSI withdrawal from the Irish market are:
  • BOSI holds a €32bn loan book in the Irish market (total Irish market is ca €350bn)
  • BOSI holds a just over 9% market share of total Irish loans market
  • BOSI withdrawal of working capital facilities in Ireland will have immediate impact on 12,000 business customers
  • BOSI also holds €10bn mortgage book, or 7% of all Irish mortgages
  • BOSI holds 5,000 current accounts
  • Amazingly, 44% of the bank’s book was impaired as per H1 2010 generating a write-off of €4bn in loans
  • Per Bloxham stockbrokers: "the move is likely to have a negative impact in the economy where liquidity is still scarce and the closing off of business lines will force some businesses to wall" (sic).
Now, unless we are willing to assume that Irish banks (with such flagships of prudential lending as AIB, Anglo, INBS etc) are massively more brilliant than BOSI in writing loans, we simply cannot avoid translating BOSI impairment rate to their books as well. Which, of course, makes my estimate of 40% across the books losses for the banking system as a whole, peak to trough, rather safe.
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6 comments:

  1. karl deeterAugust 20, 2010

    I can only comment from a lending origination point of view, but BOSI were far more lax and using a brand of self certification as early as 2002, a full 4 years before sub-prime lenders started doing the same, their loan book is likely worse, they also had cut margin products about 3 years before other banks adopted the same and expanded credit far more rapidly, in my opinion they would likely have (residential) the odds of owning the worst of the prime loan books.

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  2. TrueEconomicsAugust 20, 2010

    Yes, but 44% is across the books. Mortgages are only 31% of their total loan book. I addition, these are H1 results alone - they took impairments more aggressively than BofI or AIB in 2009 as well.

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  3. Paul MacDonnellAugust 20, 2010

    Dr. G. Is it possible that BOSI - as a later entrant - were lending to the riskier bubble-end of the economy to a (albeit perhaps slighter) greater extent than BoI and AIB etc...?

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  4. Robert BrowneAugust 20, 2010

    Anyone that took out loans from Bank of Scotland knows that AIB and BoI were telling customers to 'hold off 'on accepting these loans from Bank of Scotland until at least they (AIB and BoI) were given the chance to compete for the business. This involved them giving "better quotes" for the same mortgages. Staff, were told, sorry ordered, to beat the competition.

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  5. Fungus the Photo!August 21, 2010

    A race to the bottom, as everyone was on bonus or under the cosh to hit "targets"?

    This depression may well last twenty more years.

    Think Ireland in the fifties! Emigrate or die. Beware of those who predict a rising tide. Ensure adequate food production, locally. Suicide will creep up.

    What a perfect example of Christian hypocrisy!

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  6. ottogunscheAugust 23, 2010

    I did some work with the ESBI as they were selling ESB shops to BOSI, for BOSI to set up their branch network.

    Part of the deal negotiated between both entities was that BOSI as well as buying a lot of the ESB shop, bought the ESB's loanbook.
    These loanbooks consisted of customers of ESB who bought appliances in their retail network.

    On the wider point, it is bad news that foreign banks are leaving the Irish market.
    We will be back to AIB and BOI cartel before we know it.

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