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November 2014 Ireland Commercial Bulletin

Here you will find a concise round-up of Ireland's financial services sector, as well as key stats such as the unemployment rate, inflation and house prices.

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November 2014 Ireland Commercial Bulletin

  1. 1. November 2014 The Financial Conduct Authority has approved the purchase of HML by Computershare A central credit database may not be operational in Ireland until 2016 Ireland is expected to experience the fastest growth in the EU in 2014
  2. 2. HML News The Financial Conduct Authority has approved the purchase of HML by global financial services company Computershare. HML has been purchased by Computershare in order to extend its mortgage servicing business into the UK. Computershare plans to invest in the mortgage servicer, grow it and provide the scale and capital to allow it to take advantage of developing opportunities. Computershare provides financial and governance services across 22 countries on five continents and employs more than 15,000 people worldwide, with an annual global turnover of approximately US$2 billion (£1.2 billion), and already owns a mortgage servicing business in the USA. In the UK, Computershare is based in Bristol, Edinburgh, Halifax, London and Jersey; and will retain HML’s office locations. Andrew Jones, chief executive officer of HML, said: “Computershare becoming our parent company is excellent news for the business and those who work at HML, as well as our clients and their customers. “Computershare is committed to investing in and growing HML, allowing us to continue to be the leading third-party mortgage administration company in the UK and Ireland. With the desire to grow the business and develop the specialist expertise that HML has, it’s clear to me that culturally we are much aligned with Computershare. “HML has had 25 years of successfully delivering value to clients, customers and our people and this deal will secure the future of the company for many more years to come.” Naz Sarkar, regional chief executive officer of Computershare, said: “We’re pleased to welcome HML to the Computershare group and I’m delighted that Andrew and his senior team will be remaining with the business. Several experienced Computershare staff will be relocating to Skipton to supplement the HML team and assist with the transition to Computershare. Together, we’re excited at the opportunities that lie ahead.”
  3. 3. HML News HML has won two MFG Awards. The company took home the Customer Service/Treating Customers Fairly Award in the Mortgage Servicing Companies category and the Best Debt and Arrears Strategy Award. HML also achieved Highly Commended in both the Innovation (Non-Lenders) and Best Use of Technology (Non-Lenders) categories. The two award wins follows last year’s success, where the financial outsourcer won three MFG Awards in the Best Use of Technology, Innovation and Best Debt and Arrears Strategy categories. HML has won the competitive latter category for the third year in a row. Andrew Jones, chief executive officer of HML, said: “It is fantastic news that HML has won two awards and has been awarded Highly Commended in two more categories. The fact we have been recognised for our customer service and arrears and debt management is particularly important, as we continue to be a market leader for quality within the mortgage industry. “Taking home the Best Debt and Arrears Strategy Award for the third consecutive year is testament to our focus on appropriate outcomes for customers, which lies at the centre of our clients’ debt and arrears management strategies.” Best Debt and Arrears Strategy HML won this award for its two-pronged arrears management approach for a UK client that wanted to support those borrowers at risk of falling into arrears and increase payment on underpaying accounts. Each customer’s case was managed in accordance with their particular circumstances, with the appropriate support applied. HML implemented call campaigns targeting those borrowers who, based on its advanced analytics, were considered to be most at risk of falling into arrears in the near term. Early contact is key, as it gives borrowers more time to assess their finances and work towards a sustainable solution with their lender. Ian Carr, portfolio servicing director at HML, said: “By enhancing customer engagement through early contact, customers can enjoy better financial outcomes and targeted support. It is fantastic that our arrears management strategy has once again been recognised among respected industry peers.” Customer Service/Treating Customers Fairly HML won this award for Destination 100%, its evolutionary journey to a total quality concept in the third-party mortgage administration sector. HML wants to set a market-leading quality benchmark and support the financial services sector to be preventative against poor customer outcomes rather than reactionary, which the sector traditionally is. Pushing the quality boundaries in the UK and Ireland’s outsourcing sector reduces the tolerance for poor customer outcomes, something which is deemed as good practice by the Financial Conduct Authority. Richard Wade, customer service director at HML, said: “It is testament to the hard work of everyone at HML that our drive to be a market leader for quality has been recognised by such an esteemed publication as Mortgage Finance Gazette. This stands us in good stead to further push the market’s quality boundaries in 2015 and beyond.”
  4. 4. HML Ireland Update Date reflects what the statistic was during that period, rather than when the statistic was published Consumer Price Index (Central Statistics Office) OCT ‘14 0.2% SEP ‘14 0.3% AUG ‘14 0.4% European Central Bank (ECB) Base Rate NOV ‘14 0.05% OCT ‘14 0.05% SEP ‘14 0.05% Unemployment Rate (Central Statistics Office) OCT ‘14 11% SEP ‘14 11.1% AUG ‘14 11.2% Average National House Prices (Myhome.ie) Q3 ‘14 Up 1.4% from Q2 €193,000 Q2 ‘14 Up 1.3% from Q1 €190,216 Q1 ’14 Down 0.7% from Q4 €187,736 Arrears (Central Bank of Ireland - CBI) PDH – total PDH – 90 days+ BTL – total BTL – 90 days+ Q2 ’14 126,005 90,343 39.669 31,749 Q1 ’14 132,217 93,106 39,361 31,048 Q4 ’13 136,564 96,474 39,250 30,706 Home Repossessions (CBI) PDH BTL Q2 ‘14 1,110 611 Q1 ‘14 1,116 568 Q4 ‘13 1,014 503
  5. 5. Industry Statistics Consumer Price Index The CPI in October was 0.2% higher than the same month in 2013, down 0.1% on September. Notable upward pressures came from the education (4.8%), alcoholic beverages and tobacco (3.9%) and miscellaneous goods and services (3.5%) sectors. This was partially offset by declines in clothing and footwear (-4.9%) and food and non- alcoholic beverages (-2.7%). ECB Interest Rate The ECB base rate remained at 0.05% in November. Mario Draghi, president of the ECB, said: “The risks surrounding the economic outlook for the euro area continue to be on the downside. In particular, the weakening in the euro area’s growth momentum, alongside heightened geopolitical risks, could dampen confidence and, in particular, private investment.“ Unemployment Rate The unemployment rate stood at 11% in October 2014, down from 12.4% in the same month in 2013. There were 358,630 unemployed individuals in September, an annual fall of almost 38,000 people. House Prices The national average house price in Ireland stood at €193,000 in Q3 2014, a 1.4% increase on the previous quarter, according to Myhome.ie’s analysis of asking prices. On an annual basis, the asking price rose by 1.1%, which is the first positive year-on-year growth in seven years. Commenting, Angela Keegan, managing director of Myhome.ie, said: “It's been well flagged that Capital Gains Tax is coming to an end and that is a measure we would welcome.” According to the Central Statistics Office, national residential property prices climbed by 16.3% in the year to October. This is up from the 15% rise in September. Arrears Principal Dwelling Houses (PDH) The number of PDH mortgage accounts in arrears declined by 4.7% between Q1 2014 and Q2 2014. Out of the total mortgage accounts, 16.5% were in arrears, representing 126,005. The number of PDH mortgage accounts in over 90 days of arrears also declined during Q2, falling by 3%. These accounts totalled 90,343, 11.8% of all the PDH mortgages in arrears. However, accounts in arrears of more than 720 days increased by 5% during Q2 and currently account for almost 5% of total PDH mortgage accounts. The outstanding balance of such accounts was just under €8 billion at the end of June. Buy-to-let (BTL) The number of BTL mortgage accounts in arrears increased between Q1 and Q2 2014 to 39,669 (27.5% of the total accounts) from 39,361 (27.2% of the total accounts). Home Repossessions At the end of Q2 2014, there were 1,110 PDHs and 611 BTLs in lenders’ possession. Of the PDHs, 299 were taken into possession during the quarter, 89 of which were the result of a court order, while 210 were abandoned or voluntarily surrendered.
  6. 6. Top News Stories The 20% mortgage deposit rules may be eased. Governor of the Central Bank of Ireland (CBI) Patrick Honohan hinted at the move when speaking at the Money Advice and Budgeting Service’s National Management Forum. He stated that borrowers in Ireland may be able to obtain a larger mortgage, so long as they purchase home loan insurance. “While we point out that too liberal a use of such insurance can have the effect of neutralising the effectiveness of a ceiling on loan-to-value ratios as a mechanism for preventing house price bubbles (and while it typically provides no protection to the borrower), this would be less a concern if limited, for example, to relatively small loans and/or first time buyers,” Mr Honohan explained. The CBI recently published new mortgage rules which are due to come into effect on January 1st. These included that just a fifth of new mortgages should be issued above 3.5 times income, while no more than 15% of new home loans should have an LTV ratio of more than 80%. Consumer sentiment has fallen. Between September and October, sentiment fell from 92.8 to 85.5, according to the KBC Ireland/Economic and Social Research Institute (ESRI) Consumer Sentiment Index. The three-month moving average also declined from 89.8 in September to 88.5 in October. ESRI’s Ciara Morley commented: “Since the majority of consumers were contacted in the early half of the month it is highly probable that the Budget announcements announced on the 14th of October have not yet had the fed through to consumer sentiment this month. “All five components of the Consumer Sentiment Index were weaker in October. Declines occurred in consumers’ view of the outlook for their household finances over the next 12 months, in their view on their financial situation compared to 12 months ago, and in their expectations of unemployment over the coming 12 months. There were also declines in the recovery expectations of economic performance over the coming 12 months as well as weakened perceptions for purchasing durable consumer goods.” Ireland is expected to experience the fastest growth in the EU in 2014. Real GDP growth forecast stands at 4.6%, according to the European Commission’s 2014 Autumn Economic Forecast. The EU figure is 1.3%, while the euro area is expected to see real GDP growth of 0.8%. Ireland is forecast to have 3.6% output growth in 2015 and 3.7% in 2016. “Ireland is decoupling from the euro area, as its recovery broadens and gathers firm momentum. This robust and faster-than-expected expansion should bolster government revenues and facilitate a reduction of the deficit,” the full economic forecast stated.
  7. 7. Top News Stories The Strategic Banking Corporation of Ireland (SBCI) has launched. Initial funding of €800 million has been released to the SBCI, which is state owned and will provide tailored loans to small and medium-sized enterprises (SMEs). The first loans are expected to be made available at the end of 2014. It has been designed to pass on reduced lending costs to SMEs through access to lower-cost funding and to increase competition within the market. Michael Noonan, minister for finance, said: “We have big plans for the SBCI and it will be a key source of funding to SMEs for years to come. The legislation which established the SBCI allows for up to €5 billion to be made available to SMEs over the next five years. Existing institutions will be used as on lenders of the SBCI funds. This new source of competitive and innovative funding will support SME’s to grow and invest and create jobs”. Credit unions could face tighter regulation. The CBI has proposed new rules, including relating to liquidity, lending, reserves and controls. One proposed change is that the maximum amount an individual can save with a credit union may be halved to €100,000. Another proposal is that credit unions would only be able to borrow up to a quarter of aggregate savings, which is again half the current proportion. Anne-Marie McKiernan, registrar of credit unions, said: “These regulations will foster a safer stronger credit union sector through an enhanced regulatory framework. The regulations reflect existing requirements, some of which have been amended, and also propose a number of additional requirements.” The CBI also reiterated in the consultation paper that the Fitness and Probity regime will apply to all credit unions from 1st August 2015. It is being introduced on a phased basis, after coming into effect on 1st August 2013 for those unions with assets over €10 million. A Central Credit Register could be two years away. Finance minister Michael Noonan told Fianna Fail finance spokesman Michael McGrath that lenders will supply the information for the register during late 2015 and into 2016, meaning it may not be fully operational until 2017. Ireland currently does not have a centralised register which lenders can use to make informed decisions, something which Mr McGrath has criticised. He said: “It was clear that the lack of centralised source of credit data was a significant factor in disastrous lending decisions by Ireland’s banks and financial institutions in respect of individuals and companies. “The system of privately operated credit registers and the lack of obligation on financial institutions to cross check outstanding financial commitments fuelled the credit bubble.” He added that with credit, including mortgage, demand expected to increase, a register not in effect until 2016 could once again lead to poor lending decisions.

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Here you will find a concise round-up of Ireland's financial services sector, as well as key stats such as the unemployment rate, inflation and house prices.

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