Davy Morning Equity Briefing

Feb 18 2019

Market Comment

Rightmove asking price inflation slows to 0.2% in February

This morning’s Rightmove release shows asking price inflation on UK residential property of 0.2% in February, the weakest pace since 2009, with agreed sales down 4%. The Rightmove data will reinforce fears that Brexit uncertainties could push UK house price inflation into negative territory in 2019; recent Halifax and Nationwide data also showed stagnant price growth.

Irish banks

AIB to offer existing customers LTV variable rates; Ulster Bank sale

The move by AIB Group to allow existing standard variable rate (SVR) mortgage customers to switch to lower LTV variable pricing brings it into line with standard market practice and is most likely a move to protect itself against the increased level of switching in the Irish market. Elsewhere, Ulster Bank Ireland has appointed Pepper Ireland as it prepares to sell a further non-performing mortgage portfolio – illustrating that loan sales will remain an important tool in the normalisation of non-performing exposure (NPE) ratios in Ireland.

permanent tsb Group

FY 2018 results preview

2018 results will demonstrate a c.70% reduction in non-performing exposures (NPEs), assuaging any lingering solvency concerns. With a ratio just below 10%, NPEs will be a continued focus; however, PTSB’s future returns potential now commands greater attention. Despite positive commercial momentum – particularly through increased mortgage market share – any greater clarity on the cost outlook will be key.

AIB Group

FY 2018 results preview

AIB will report FY 2018 results on March 1st with loan growth, non-performing exposure (NPE) reduction and capital requirements the key focus in our view. Focus on the magnitude and timing of surplus capital return will grow through the course of 2019, backed by NPE reduction, but we expect a strong solvency position to facilitate a further ramp-up in the dividend with results. Despite executive change, we do not expect any significant shift in strategy to emerge.

Bank of Ireland

FY 2018 results preview

Bank of Ireland reports FY 2018 results on February 25th with net interest margin (NIM), loan growth and progress on transformation the key areas of focus in our view. Initial achievement of milestones towards medium-term strategic targets will be important, while the near-term outlook will also be scrutinised given the uncertain political backdrop as we approach the UK exit from the EU and the competitive dynamics in the UK retail banking market.