Bank of Scotland growth to continue

ONE of the country’s emerging banking forces is Bank of Scotland, which last week announced an 84% increase in its pre-tax profits for last year.

BOS made its name here when it shook up the mortgage market, knocking 1.5% off the basic cost of a home loan.

That happened in July 1999 and it resulted in about €200m a year staying in the pockets of home buyers.

Prior to that, the banks had been cooing the same tune at us for years, saying they could not possibly charge consumers any less and live with the consequences. Well, they do now.

That was Bank of Scotland's calling card, so to speak

It created a name for itself with consumers, although it took little by way of overall market share.

It just made the point that consumers could get a better deal.

In a famous phrase that came back to haunt him, former First Active boss John Smyth said he would not lose any sleep over the bank's entry to the home loan market.

First Active lost well over €2m from the bottom line as a result, and Mr Smyth decided some time later, for personal reasons, to leave the bank in order to pursue other interests.

Bank of Scotland Ireland chief executive Mark Duffy has warned of further turmoil ahead in Irish banking.

He envisages major change in the coming years, with one of the major banks likely to be taken over.

He firmly believes that the Competition Authority's report into banking will shake the sector to its foundations and precipitate a slashing of margins with huge implications for the sector overall.

For the first time, he expects banks will be obliged to fully co-operate with clients who want to move their accounts to another bank.

"This will create a level playing field for the first time and pave the way for further overseas competition to entry the market, he said.

Just to keep the pot boiling, BOS is about to set another torch to the margins of the banking sector.

It has already signalled its intention to enter the corporate current account market, with savings of up to 3% on the cost of borrowing indicated and significant improvements on the 0.5% to 1% offered to businesses whose accounts are in surplus.

"This is just so simple you would want to be stupid as a business not to open an account," Mr Duffy said.

In the wider context, Mr Duffy envisages that the implications of the Competition Authority report into banking will precipitate huge change.

This will create a level playing field for the consumer and for outside competitors who will be more inclined to move to the Irish market once "the mobility of accounts is guaranteed," he said.

It happened in Britain and it is about to happen here, he believes. Reflecting on the way forward, Mr Duffy said: "It is a small market and the huge profits are because of the duopoly enjoyed by Bank of Ireland and AIB.

"If you suddenly open the market up, it means prices come down. It means more people come in and it means an awful lot better choice for Joe Public."

That process is about to take off as the market consolidates, he said.

"That's why I'm so clear there will be a role for us. We will become a bigger bank, however that comes about," he said.

BOS has the resources to take the bank forward and the current account will just be the "bridgehead to further developments in the consumer as well as the corporate sector down the line," he said.

"So do I think there are other acquisitions in the pipeline? Yes."

He added: "We will always have an eye to other acquisitions do I have one at present? no are we looking for one yes."

"But I don't see much in the Irish market place. We're looking at significant growth this year."