PTSB makes "tiny" profit by increasing interest rates?

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This puzzles me - why take all the flak, put bank staff in the firing line etc - when, according to their CEO, on various TV & Radio outlets over the past week, the recent .5% interest rate increase on their variable rate mortgage will effect 50,000 customers (I take it he means accounts), and the average increase is around €13.75 per month.
This means they have just increased income by €8.25m per annum, less whatever costs they may have associated with this move. This seems a ridiculously small amount (in banking terms), and makes me question (again) Brian Lenihan's public defence of the move on the basis that "Unfortunately this increase reflects commercial market realities, including the increased cost of accessing funds"

Unless of course they have plans to continue on this path with several more hefty increases.

(Mods: Obviously posted in wrong forum, my error. Can you move into Mortgages etc please)
 
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Yes that could well be the attitude, and banks, I suppose will be banks.

What I'm really calling into question this notion of a commercial imperative being touted by the Minister for Finance.

Any comparison between the almost unnoticeable improvement in bank profits arising, VS the potential hardship it causes for 50,000 account holders, surely exposes Brian Lenihan's comments as bizarre?
 
There may be more to it than the interest income.

Some affected borrowers will move to a different lender, improving PTSB's capital ratios. Unfortunately this may decrease the quality of the remaining loan book, as those borrowers most able to move will be those least likely to default.

New borrowers will be discouraged from even applying, reducing costs on the input side.
 
I wonder if it has anything to do with those currently on fixed term teaser rates. Anyone who has bought in the last two years is probably on a fixed term moving to SVR at the end of the term? So while there are "currently" 50,000 people with such a mortgage, the numbers about to move to them may be higher?
 
Do people want the bank to run at a loss and the state to have to bail them out again?
 
MugsGame said:
There may be more to it than the interest income.

Some affected borrowers will move to a different lender, improving PTSB's capital ratios. Unfortunately this may decrease the quality of the remaining loan book, as those borrowers most able to move will be those least likely to default.

New borrowers will be discouraged from even applying, reducing costs on the input side.
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I heard the figures of between 40 and 50 million income extra been mentioned by Irish brokers/analysts.

They aint doing it for 8 million.
 
smiley said:
I heard the figures of between 40 and 50 million income extra been mentioned by Irish brokers/analysts.

They aint doing it for 8 million.
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I am quoting the figures widely used by the Bank's CEO last week. Average increase of eur13.75 per month, for 50,000 customers.
 
Purple said:
Do people want the bank to run at a loss and the state to have to bail them out again?
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I won't speculate on what people wish for the banks in that respect, however it's not relevant to my point, as Eur8.25m is hardly the difference between the banks running at a loss or not.

Indeed it is the lack of any great impact on the bank's profit or loss that causes me to question this in first place.
 
callybags said:
I find it hard to reconcile these two quotes from Indiansign's posts
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Cally,

Obviously the impact is greater for some than for others. Note that the eur13.75pm figure is the average, however many mortgage holders will be hit for a lot more than that, and evidently, many a lot less.

(Damn Euro symbol key not working)
 
Indiansign said:
I am quoting the figures widely used by the Bank's CEO last week. Average increase of eur13.75 per month, for 50,000 customers.
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In which case, as I supposed above, they must expect to make more in the future either when fixed rates come off the fix or with new business.
 
Indiansign said:
This puzzles me - why take all the flak, put bank staff in the firing line etc - when, according to their CEO, on various TV & Radio outlets over the past week, the recent .5% interest rate increase on their variable rate mortgage will effect 50,000 customers (I take it he means accounts), and the average increase is around €13.75 per month.
Click to expand...

Well like many people on this thread it's quite possible they didn't see a commercial enterprise attempting to reduce losses as a big problem. Unless of course we have secretly been turned into a communist state, although I doubt a communist state could possibly condone Gerry Ryan continuing in employment.
 
Indiansign said:
This puzzles me - why take all the flak, put bank staff in the firing line etc - when, according to their CEO, on various TV & Radio outlets over the past week, the recent .5% interest rate increase on their variable rate mortgage will effect 50,000 customers (I take it he means accounts), and the average increase is around €13.75 per month.
This means they have just increased income by €8.25m per annum, less whatever costs they may have associated with this move. This seems a ridiculously small amount (in banking terms), and makes me question (again) Brian Lenihan's public defence of the move on the basis that "Unfortunately this increase reflects commercial market realities, including the increased cost of accessing funds"
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I think your calculations are right. the average remaining term is 13 years on a 62.5k variable mortgage. So they'll take in €8m extra per annum over 13 years i.e. in or about €100m.

The company has a market capitalisation of €850m so this move is fairly significant in that context
 
It depends too on how they define "average". If they define it as "median" rather than "mean", then the profits could be larger.
 
"Mr Henneberry [Company MD] said AIB has 40,000 customers on a standard variable rate mortgage, which represents one in three mortgages in the State."
[broken link removed]

This caught my eye. So the total number of mortgages in the state is 120,000? This seems low to me - just based on gut feeling mind you.

If these figures are correct, then the 50,000 the PTSB have just raised the rates for, represent almost half of all mortgage holders in the state.
 
I'd say it means one in three mortgages in the state are standard variable rate mortgages and 40,000 of AIB's mortgage customers are on the SVR.
 
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