'Bank margins up in North due to economic uncertainty'

Bank margins on financial products have risen amid financial uncertainty, a Stormont committee heard today.

Profits have increased on new deals despite stiff competition between providers, the British Bankers’ Association (BBA) said.

Homeowners and businesses have been feeling the pinch as banks have tightened criteria for lending money.

Representatives of the four main Irish banks were grilled by the Finance Committee today.

BBA executive director Eric Leenders said: “We have seen margins and arrangement fees competed away and we are now seeing a correction and pricing more related to the risk going forward.

“For new deals there is certainly a widening of margin to what might be perhaps a more realistic level outside the constraints of that competition.”

He said there was a reduced volume of applications for loans for investment.

“That I think is very much a consequence of confidence. One common theme is that a number of small businesses want to in effect wait and see what happens over the next six to 12 months.

“They don’t want to commit to a capital expenditure programme that could prove quite difficult if the economy continues to deteriorate.

“There’s a lot of pent-up demand that should flow through and I think one of the things that we could collectively consider is how to encourage businesses to consider investment plans albeit right now it is probably appropriate that liquidity and cashflow has to be their immediate priority.”

British Business Secretary Peter Mandelson today announced a range of measures designed to underwrite loans taken out by beleaguered businesses.

Ulster Bank, First Trust, Bank of Ireland and Northern Bank representatives appeared today before the committee at Stormont.

Committee member Ian Paisley Jnr said Ulster Bank had increased some of its fees from £395 (€435) in January 2006 to £1,495 (€1,645) in January 2008. That has decreased to £999 (€1,100) today.

He said now was the time to “walk the walk” and help customers.

“I do believe that over the last number of years the banks have been able to be part of the risk and growth sector in the economy. They have done very well,” he said.

“Customers now are seeing the squeeze, they are being told by banks, ’we can’t lend you any more, we can’t risk any more, you are going to have to make people redundant’ even though they are good solid businesses.”

He claimed the public perception today was that bankers were the problem.