Warning on any bid to hike rates

HIGHER interest rates would cause serious problems for the banking sector in both the commercial and residential areas a top banker warned yesterday.

Sean FitzPatrick, chief executive, Anglo Irish Bank said “If there were higher interest rates there could be absolute serious problems including in the whole mortgage area.”

Commenting on the back of a high successful first half year Mr FitzPatrick said: “I'll tell you straight out we have never had six months like this in our lives.”

On the strength of the good figures he reiterated the bank’s forecast that it will continue to grow its earnings by 15% a year over the next few years.

Stuart Draper of Dolmen Butler Briscoe said the real threat to the banking sector was the Government at this stage.

If it was to make a “pigs ear” of the property market by interfering with land prices or introducing some other tax measure then the situation could get very problematic.

Mr Draper said the level of performance of the banks has defied the pessimists.

Unless something untoward happens he sees no major problems on the horizon, he said.

Mr Draper expects that a benign environment in the lending markets to hold with the economy therefore managing to avoid the problems many fear are about to engulf the Irish property sector.

Mr FitzPatrick said Ireland continued to be critically important for the bank.

While in percentage terms lending was lower than in Britain or Boston during the first half it still did its biggest lending in the Irish market with loans totalling €1.2 bn.

Money lent in Britain was just under that at €1.1bn, while €250m was lent in the Boston area.

Overall he said he was optimistic that low interest rates will remain for the next two to three years.

In the light of that, a potentially more serious underlying situation in lending will be averted, he said.

Certain sectors are hurting including tourism, high tech and the restaurant trade.