A5G.IR - AIB Group PLC

[BroKon]

All three Irish banks are subject to the salary cap (BKIR got an exemption for their CEO as her salary was structured to match that of her predecessor, but that is it), so they all keep losing their top talent. The politics in Ireland around banks is pretty toxic, and continues to have repercussions on the profitability of the banks, so I don't blame you for wanting to put it in the too hard pile, but for a long term holder, I am not sure there is much downside, so if you can buy them 10-15% lower (they have the advantage of being volatile), it may be worth doing the work. Anyway, thanks for starting this thread, always useful questioning my thesis.

[ValuePadawan]

Something else I worked out is that BKIR has about 380M in interest earning assets per branch. [100.5B interest earning assets / 265 branches (BKIR 2019 interim report pg 50)]

Meanwhile AIB has 421M in IEA per branch. [85.9B/204 branches (AIB 2019 interim report pg 105)]

Somehow AIB is getting more assets per branch, maybe it's wealthier customers or they have branches in larger population centres with more customers/branch while more of BKIR's are in villages with smaller populations per branch.

It's a crude way of measuring the banks performance per branch. It seems like AIB is attracting 11% more assets per branch.

BKIR should either close down some of its smaller branches or figure out a way to increase its assets.

If I figure it out I'll let you know but that ratio is something else to keep an eye on.

Also thanks for the info that all banks are fighting with one fist tied behind their back when it comes to attracting talent, at least they are on an even pitch.

[Spekulatius]

I believe that Ireland will benefit from Brexit, perhaps tremendously. At least some business that were located in the UK may find it easier to business with the EU from within the EU, so Ireland will be a natural spot.

Then on the other hand, I like the prospects for the banking business in the UK better. The reason is that the UK keeps their GBP and their own central bank and most likely never will have the negative interest rates that are destroying the banking system in Europe.

[Cigarbutt]

If you know or believe that coming out of the low rate rabbit hole is likely and without consequences, and if you think that rates will rise and reach escape velocity, then the AIB Group, or its oligopolistic peers, is a nice place to be. I think that low rates (for banks, including the Irish ones) are a solution that is (and will be) turning into a problem. AIB's net interest margin is starting to show that IMO.

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Then on the other hand, I like the prospects for the banking business in the UK better. The reason is that the UK keeps their GBP and their own central bank and most likely never will have the negative interest rates that are destroying the banking system in Europe.

This is nothing short of fascinating. In another period, Great Britain obtained the first-mover advantage (sort of) when it decoupled from the golden standard. This marked the end of an era, triggering a protectionist race to the bottom as others followed suit. There are periods where achieving domestic economic goals supersedes everything else, including your neighbor. And now, the UK has figured out that it may be better off the European Standard and may be, again, playing the first-mover card. I would say that higher rates now in the UK are tied to the transitional uncertainty and the decoupling may allow more flexibility in dealing with internal issues but of one of the outcomes may involve competitive devaluations and, overall, an absolutely deeper hole.
https://www.ft.com/content/718c8a62-e91d-11e9-a240-3b065ef5fc55
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Irish banks (including AIB) are still numb from the GFC but have done relatively well compared to European peers. Looking at the net interest margin evolution over the last few years, this appears to be related to the relative lack of competition in the domestic markets and to lower funding costs, both factors somewhat related to the continental "macroprudential" policies.
https://www.centralbank.ie/docs/default-source/publications/financial-stability-notes/no-10-irish-retail-bank-profitability-2003---2018-(nevin).pdf?sfvrsn=4

Opinion: Irish banks, like many of its European sisters, have become zombies in an environment that, somehow, needs to deflate.
-Dialogue coming from a classic financial textbook:
Alice         “But I don’t want to go among mad people,”
The Cat    “Oh, you can’t help that, we’re all mad here. I’m mad. You’re mad.”
Alice        “How do you know I’m mad?”
The Cat    “You must be, or you wouldn’t have come here.”