House prices will grow at a crawl next year but there will be no repeat of a property crash here under a crash-out Brexit at Halloween, the boss of KBC Bank Ireland has said.
Chief executive Peter Roebben said that all banks face significant challenges in the coming months, not only from any hard Brexit hit on the Irish economy, but the growing clouds from the global trade wars and the prospect for ECB interest rates staying lower for much longer, which weighs on lenders’ profitability.
A hard-Brexit at the end of October will not lead to a crash in Irish house prices but cause “a further tempering” in house price growth as a number of buyers postpone decisions to buy homes, Mr Roebben said.
Official figures show that house prices have continued to tick higher in recent months, but that the annual residential property price inflation has slowed to below 3% across the State.
Asked about the prospect for an ECB deposit rate cut next month and its effect on the bank’s mortgages and retail savings rates, Mr Roebben said that KBC Ireland had “partly” anticipated lower official rates by the reductions it announced last week in some of its fixed-rate mortgages.
On the €3.4bn the bank holds in deposits from Irish savers and whether they could expect cuts in their savings rates next month if the ECB moves, he said its message was that KBC remains “a challenger bank” in Ireland and was looking to seeking to attract new customers. He said it was satisfied with its saving deposits and mortgage rates for the time being.
“It is, of course, a valid question if these low interest rates stay much longer, it puts a significant burden on banks’ business models,” he said.
After a growth spurt in new business, KBC boosted its market share to 12% by the end of June, up from a share of around 10% a year earlier.
Its net profit in Ireland fell sharply to €24.9m in the six months to the end of June from €115.9m a year earlier when it had posted significant writebacks, of €80.8m.
It is waiting for a decision on the Central Bank on the fine for its part in the industry-wide tracker mortgage scandal. Mr Roebben said that the coming months will be significant for all economies around the world.
Markets again reflected some of those pressures, as sterling again slid against the dollar and the euro. It traded at one stage at 92.65 pence -- a two year low -- but rose slightly later to 92.25 pence -- after the Financial Times, citing unidentified senior aides to the prime minister, reported that Boris Johnson would hold an election in the days following Brexit if MPs sunk his government with a vote of no-confidence.
Mr Johnson has demanded the EU show it is willing to change the deal it had agreed with his predecessor Theresa May before new talks can begin. The EU has repeatedly said it will not reopen the negotiations. Foreign exchange strategists polled by Reuters predict that the pound will trade between $1.17 and $1.20 as the October 31 deadline approaches. Betting markets also forecast a higher chance of a no-deal Brexit.
- Additional reporting Reuters