Ulster Bank justifies SVR

Sarenco

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http://oireachtasdebates.oireachtas.ie/Debates%20Authoring/DebatesWebPack.nsf/committeetakes/FIJ2015042900002?opendocument#A00400

I am attaching a link to the Finance Committee discussions with Ulster Bank and Bank of Ireland last week. The exchanges are well worth reading in full (IMO) for anybody that is interested in the SVR and/or mortgage arrears resolution debates.

In particular, I thought Ulster Bank's justification of their current SVR was interesting. Per Jim Browne (Ulster Bank CEO):-

"Within the wider RBS, mortgage lending is an important part of our offering in all our main markets, including England, Wales, Scotland, Northern Ireland and Ireland. Broadly speaking the interest margins in all of these markets is similar. However, unlike the other markets, our mortgage book in Ireland has been loss-making. Notwithstanding this fact and reflecting our commitment to the market, we have been progressively reducing our variable interest rates to both our existing and new customers. Separately, the cost of providing mortgage finance reflects the cost of our capital funding, operations, compliance, management of arrears, credit losses and levies. Virtually every one of these inputs in Ireland is substantially higher when compared to other markets in which Ulster Bank and RBS operate. In this context, we do not believe that our SVR is overpriced."

It strikes me that practically all these additional costs are a direct result of policy decisions taken at a government or regulatory level.

I would be interested to hear others views on whether the time has now come to reverse these policies.
 
It strikes me that practically all these additional costs are a direct result of policy decisions taken at a government or regulatory level.

I disagree here is the key:

management of arrears, credit losses

That's SVR's paying for the can't pay, the won't pay and the strategic defaulters etc. Personally I've no issue with the can't pay.
 
They would presumably save money on the "management of arrears" if they trained some staff to actually deal with the customers who want to cooperate and come to sustainable arrangements under MARP instead of ignoring all calls and having customers go through their entire saga with each staff member every time they ring.

Some kind of notes system that actually gets used, for example.

Alternatively if they find a cheaper bulk supplier of the peanuts they could probably cut their wage bill :)
 
I've an SVR with Ulsterbank, previously First Active so I am familiar with dealing with UB, so here is my view:
"capital funding, operations, compliance, management of arrears, credit losses and levies"
Capital funding
Their parent group affiliation would give them access to the best rates of any Irish Bank. I dont buy this excuse.
Operations
Really more expensive than the UK, is this why they are based in a low cost centre in Sandyford, and ping every query I have with them to their UK customer service unit? Even statements are posted from the UK.
Compliance
Over the years and without going off on a tangent with the details I've successfully complained many times about mistakes and corresponded with their compliance unit. This is based in Donegal square, Belfast UK.
Arrears
Last year I switched my current account and gave the new details to UB for the direct debit. Of course, they screwed up and debited the wrong account which bounced the payment. I got a nice phone call from a lovely lady in Edinburgh stating I was in arrears. Luckily, I could prove the fault was on their side, which they accepted. Another UK cost however.
Credit losses - Does he mean trackers? Borrowed too high and lent too low or is it full write downs, unclear to me.
Levies - This is not unique to Ulsterbank, or to their Irish operations. Plus, this would be spread across all lines of business of which SVR mortgage lending is only one.
Oh the day when I am out of negative equity and I can switch from Ulsterbank. I will hold a switching party and you are all invited :)
 
Thanks for the feedback.

I thought the explanation provided by Ulster Bank was interesting as it is the closest thing we have to a comparison between the costs of providing mortgage finance in Ireland and our nearest neighbouring jurisdictions. Also, Ulster Bank presumably will not feel the same level of political pressure regarding SVRs as other lenders in which the State holds an equity stake.

A few thoughts:-
  • Capital funding costs would obviously be higher here due to the significant additional capital that has to be set aside to address the extraordinary level of unresolved non-performing loans;
  • Operational and compliance costs may be higher in Ireland due to the impact of various Central Bank initiatives;
  • Management of arrears costs would clearly be higher in Ireland due to the combined impact of MARP and the delays and other difficulties involved with repossessing properties;
  • Credit losses refer to losses on defaulting loans, which are arguably higher than they need to be due to policies and practices that encourage strategic defaults;
  • Levies imposed on the banking sector in Ireland are not insignificant.
The above are all directly or indirectly impacted by government and/or regulatory policy.

It is interesting that Ulster Bank does not cite its cost of funds or its back-book of low margin loans (trackers) as reasons for the higher SVRs here.

I also thought it was interesting that it was stated that mortgage margins across all markets (including Ireland) where RBS operates are broadly similar.
 
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Ulster Bank's parent company RBS have the same if not more problems at home in England than Ulster Bank have in this Country, particularly in relation to compliance costs ( libor scandal, commodiites rigging etc)
 
They would presumably save money on the "management of arrears" if they trained some staff to actually deal with the customers who want to cooperate and come to sustainable arrangements under MARP instead of ignoring all calls and having customers go through their entire saga with each staff member every time they ring.

Some kind of notes system that actually gets used, for example.

Alternatively if they find a cheaper bulk supplier of the peanuts they could probably cut their wage bill :)

I think you are probably right.

When advisors tell those in mortgage arrears to engage with their banks they should give some thought to the mechanism with which the customer engages.

Being bounced around an unskilled arrears team in which the left hand doesn’t know what the right hand is doing is hardly conducive to reaching sustainable solutions or to retaining the customer’s “engagement”.
 
Piggybank.
Please add( Not just Ulster) in Packaged Banking 11,000,000 cases .
Please add( Not just Ulster) in Payment Protection Policies ,£25,000,000,000 paid out and rising.
 
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