Q&A: What does Bankinter move to Irish market mean for me?

Spanish banking group Bankinter has announced plans to establish Avant Money as its Irish banking branch.

What exactly is Bankinter?

Bankinter is a leading Spanish banking group. It is a top 50 European bank which operates in Spain, Portugal, Ireland, and Luxembourg.

What about Avant Money? I’ve heard reference to them in an Irish context before.

Avant Money is part of the Bankinter group, and has, under different forms, been present in the Republic since 1997, originally as MBNA credit cards.

In May 2019, Bankinter closed the deal to purchase Avantcard. Since then, the renamed Avant Money has demonstrated strong growth across all product lines including credit cards, personal loans and mortgages.

The loan portfolio of Avant Money, the current brand under which the bank operates in Ireland, stands at €3.3 billion – that’s €2.4 billion in mortgages and the remainder, €900 million, in consumer loans – with an overall non-performing loan ratio of 0.34 per cent. It made a pretax profit of €9 million for the first three months of this year and has about 200,000 customers here.

Avant Money offer mortgages, as well, don’t they?

Yes. Avant Money launched its mortgage business in 2020. It’s mortgage book was worth €2.4 billion at the end of March, which was 53 per cent higher than a year ago.

Okay, so this sounds big. It must be good news for consumers?

On the face of it, yes it is. The exodus of foreign-owned retail banks like Ulster Bank and KBC Bank Ireland in recent years has left a domestic banking market dominated by just three lenders – AIB, Bank of Ireland and Permanent TSB. In recent months those banks have faced criticism for offering relatively low interest rates on deposits even as the European Central Bank has hiked rates to their highest level in years. In other euro zone countries, banks are paying more to attract deposits; for funds left on deposit for at least three months, euro-zone banks pay on average 0.7 percentage points more than in Ireland, and still make good profits.

The arrival of a new player in the market should, in theory, lead to better offers for customers right across the board.

The news may also be a win for the Government – Minister for Finance Michael McGrath has already welcomed the move – and the Central Bank, both of which have been vocal about the need for more competitors in the sector.

Niall Corbett, chief executive of Avant Money, called the decision “a clear commitment to Ireland” and added that the bank is looking forward to bringing “even more choice, value and competition to the market”.

Still, the exact details of what will be on offer remain to be seen.

So, the banks here already probably won’t be too happy to hear this news?

Quite right. This news has broken just as AIB, Bank of Ireland, and PTSB head back into private ownership. (Bank of Ireland is now fully private again, while taxpayers continue to own almost 40 per cent of AIB and 57 per cent of PTSB.) To some degree their shares have been buoyed by the lack of meaningful competition here. Now they face a new competitor and, depending on what Bankinter offers, initially in the deposits space, they will have to respond.

Okay, so what happens now?

Bankinter is taking the necessary legal and regulatory steps to formally set up in Ireland. That will allow it to offer a wider range of financial products and services to the Irish market in the future. It will also provide Avant Money with a full banking licence and will enable the company to expand the products and services it offers, beginning with deposit products initially.

Will all this mean more bank branches opening in Irish towns and villages again?

No. The bank will be digital based, rather than using the traditional branches model.

I am already a customer with Avant Money. How does this impact me?

It doesn’t. Avant Money customers will not be affected and the company will continue to provide cards, loans and mortgages through its existing channels. Any customers who have questions can contact the Avant Money line on 0818 409511.

Is there anything else I should know?

One extra piece of potential good news to add is that Bankinter has said it sees potential for future job creation through the expansion of its operations and offerings, contributing to economic development and employment opportunities here in Ireland. It currently employs about 300 people in the State.