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Ireland’s banking sector: Facts & Figures

Updated September 2019 – For earlier editions of Facts & Figures click here

Ireland’s economy posted another solid performance in 2018 with gross domestic product (GDP) up 6.7% year-on-year in volume terms. Modified total domestic demand, which removes disproportionate globalisation effects such as intellectual property imports, rose by 3.3%. Ireland’s current account surplus increased to 9.1% of GDP in 2018.

The unemployment rate fell to 5.4% by Q4 2018, down from 6.1% a year earlier. The gross saving ratio of households (saving as a percentage of total disposable income) increased from 10.8% in 2017 to 11.8% in 2018.

There were 61 banks operating in Ireland at the end of 2018. These included 24 credit institutions authorised in Ireland (of which five were covered bond banks), 36 branches of banks authorised in other European Economic Area countries that were operating in Ireland and one branch of a non-European Economic Area credit institution operating in Ireland. Twenty of the banks were headquartered in Ireland or had more than 20% of their business with domestic customers. While the number of banks has been stable in recent years, the number of credit unions – not-for-profit, member-owned financial cooperatives funded primarily by member deposits – fell from 272 to 252 between September 2017 and September 2018 as credit unions consolidated. Most credit unions have assets of less than €100 million.

The Irish government has majority stakes in two banking groups (a 71% stake in Allied Irish Banks and 75% in permanent tsb) and a minority stake (14% in Bank of Ireland). The five main banks operate about 650 branches and almost 3,000 ATMs for cash withdrawal nationwide. A significant proportion of ATMs are operated by non-banks.

Card payments continued to grow strongly, especially debit cards for which volumes grew by 22.6% in 2018 to about 938 million. Contactless payment volumes grew by 62% in 2018 and by the last quarter of 2018, contactless accounted for more than 36% of the volume and almost one-tenth of the value of card payments

Outstanding credit institution (bank and credit union) loan balances have declined in recent years as both businesses and consumers have deleveraged, but gross new lending grew in 2018.

BPFI research shows that new residential mortgage lending rose by 19.7% year-on-year to €8.7 billion, of which €1.2 billion was re-mortgaging with a new lender. First-time buyers drew down some €4.2 billion in mortgages.

Gross new lending to small and medium-sized enterprises (SMEs), excluding financial intermediation, rose by 7.7% year-on-year to €5.3 billion during 2018, according to the Central Bank of Ireland. Net lending to SMEs (drawdowns less repayments) declined by €970 million over 2018. The government-owned Strategic Banking Corporation of Ireland also provides wholesale finance for on-lending to SMEs.

Some €23.4 billion of the €42.9 billion loans outstanding to Irish resident private-sector enterprises (excluding financial intermediation) was outstanding to SMEs at the end of 2018. Housing loans of €76.1 billion were on the balance sheets of credit institutions, with a further €21.6 billion in securitised loans.

Other personal credit outstanding continued to recover in 2018, increasing to almost €14 billion by year-end, up from €13.5 billion a year earlier.

Deposits also grew, with private household deposits at almost €98.1 billion at the end of 2018, up 4.3% year-on-year, and deposits of Irish resident private-sector enterprises (excluding financial intermediation) up 3.8% to €58 billion. Most of the growth in deposits came from overnight deposits with household current account balances up 14.5% year-on-year to more than €34 billion. A Post, the State-owned postal service operator, managed a further €20.6 billion in national savings schemes and post office savings accounts on behalf of the national treasury.

Credit institutions in Ireland employed 27,940 people at the end of 2018, according to the ECB. Banks paid some €2.6 billion in wages and salaries in 2018, of which banks mainly active in international markets contributed almost €0.7 billion. They also paid some €0.5 billion in corporation tax.  Since 2014, banks have also paid an annual levy of about €150 million. By 2021, banks will have paid €1.2 billion in such levies.

Banks in Ireland have made significant progress in reducing NPL ratios. According to latest EBA data, the NPL ratio was 5.8% as of December 2018, down from 21.6% four years earlier.

Gross value added (GVA) by the banking sector was estimated at €5.3 billion in 2016, according to the Central Statistics Office. Profit after interest and tax rose from €3.3 billion in 2017 to €3.8 billion in 2018. Ireland was also the eighth largest exporter of financial services (excluding insurance and pension services) in the world in 2017, according to UNCTAD.

Total credit institution balance sheet assets rose to almost €600 billion, the first such increase since 2008, reflecting an increase of almost €50 billion in loans outstanding to non-residents. In terms of liabilities, deposits from Irish private-sector residents remains a key source of funding, however, the increase in lending was supported by large increases in deposits from non-euro area residents as well as non-resident capital and reserves.

Contributor: Anthony O’Brien