The Economist [Fri, 09 Apr 2021] by calibre

Author:calibre [calibre]
Language: eng
Format: epub
Publisher: calibre
Published: 2021-04-10T05:47:47.196000+00:00

COMMERCIAL BANKING was once said to be governed by the three-six-three rule: pay depositors a 3% interest rate, charge borrowers 6% and always be on the golf course by 3pm. That world is long gone. Nowadays, with interest rates stuck on the floor, the spread between deposit and loan rates has shrunk. Rather than teeing off at 3pm, bankers are more likely to be stuck behind their desks trying to think of new ways of turning a profit. In an era of ultra-low interest rates the traditional business model looks much less attractive to investors, as NatWest, a large British bank, has found while trying to sell the Irish operations of its subsidiary, Ulster Bank.

NatWest Group, following a strategic review, has been trying to offload its Irish operations for six months. While there has been interest in the loan book from private equity firms, no-one wants to take on the branch network and deposits. In February NatWest announced that the branches would be closed, and the Ulster Bank’s Irish business would be wound down over the coming years. As a private equity boss says, in the past “you would buy a deposit business because it was a source of cheap funding, but today you can get even cheaper funding from markets without the hassle of running bank branches.”

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