Politicians happy to let banks profiteer off people’s backs
HERE in Ireland, and all over the world, banks are profiteering on the backs of regular, working people and businesses, who are now coughing up tens of billions more in higher interest rates. And it appears that our political elites are determined to let them away with this barefaced, legalised ‘robbery’.
The Bank of Ireland, for instance, were literally rolling in it for the first half of this year, with a tsunami of net interest income growing to €1.8bn, a staggering 68% rise in just a single year. Profit before tax, which can only be regarded as supernormal, grew by – wait for it – 190%. The bank’s operating profit of €1bn to the end of June was €649m more than for the first half of 2022.
Similarly, and without the slightest hint of any shame whatsoever, AIB reported an operating profit of more than €1.2bn for the first half of 2023. This compared with the bank’s total profit of €1.08bn for all of last year.
JP Morgan, the biggest bank in America, has admitted that their profits are up by 35% on the back of higher interest and lower than normal loan losses. Profits for the third quarter soared to $13.2bn, almost $1.4bn higher than their most optimistic expectations.
IN BRITAIN also, banks are coining it – with the HSBC doubling profits between July, August and September as compared to last year, supported by a 15% rise in net interest income – the difference it charges for loans, compared to what it pays for savings deposits.
All of this outrageous profiteering – which is exactly how Ciarán Nugent, economist with the Nevin Economic Research Institute suggests it should be described – is putting the most extraordinary pressure on mortgage holders and small businesses in particular.
By August of this year, in response to successive ECB rate increases, designed to control runaway inflation in the Eurozone, new mortgages in Ireland came with an average interest rate of just above 4%, the highest in nearly 10 years.
Yet, despite all that, the Government’s response has been miserable
– a stingy mortgage interest-relief scheme at only 20% of the increased interest borrowers are paying, to a maximum relief of just €1,250. Borrowers are being told, suck it up.
And that’s precisely what they’ve been doing since all the interest rate increases from July of 2022. For those on a modest €200,000 tracker loan, the extra payments amount to €5,000 a year, or about €100 net per week.
According to Rachel McGovern of comparison site Bonkers.ie, ‘lenders are having a bonanza right now, as we’ve seen in the profit margins for the first six months of the year’. ‘Bonanza’, probably the politest way possible to describe the rip-off that’s now happening.
And it’s getting worse. Only this week, AIB announced that its total income in the first nine months of this year shot up by 70%, with net interest income at warp speed, up 95% year-on-year. We shouldn’t forget that AIB now has almost a third of the mortgage market and expects to rake in over €3.75bn in net interest income by the time Scrooge goes ‘Bah! Humbug!’ in a Christmas Carol.
The only reason such outlandish spikes in income won’t be even higher this year is due to the ECB taking a pause in jacking up interest rates. This is not to relieve pressure on screwed borrowers but because Germany is showing signs of a downturn, with business there contracting for four successive months.
Meanwhile, in the UK, even Tory MPs are getting restless about these windfall bank profits, in contrast to the laid back approach of the broad span of TDs in that fully detached home on Kildare Street.
FINANCE Minister Michael McGrath now says he’ll increase the bank levy to €200m for next year, up from just €87m currently, ignoring entirely that the levy was introduced as a kind of payback for the bank bailout which cost us about €42bn. We’ve known since the ECB began to raise interest rates last year that banks were in for vast profits, which were as undeserved as they were unearned. It was simply collateral advantage because of inflation, nothing got to do with our banking geniuses.
The fact that Minister McGrath, with the support of the entire Government, refuses to claw back these remarkable windfall profits shows how much Official Ireland has been captured by a powerful and thoroughly ungrateful banking system, despite taxpayers saving the banks with all those bailout billions and impoverishing themselves in the process.
It’s a pitiful and stark example of democratic government acknowledging who the real master of the universe really are.