Madam, - I am disappointed at the tenor of your Editorial, "The Minister and the banks" (October 17th). You state that Irish banks have contributed to their own downfall, claiming that international banks which followed prudent lending policies are prospering - inferring that the Irish banks followed less prudent lending policies.
Where is your evidence that either AIB or Bank of Ireland has been less than prudent in its lending policies? At the end of July this year AIB published their results for the six months to end June 2008. They showed some increase in bad debt writeoff but nothing untoward given the economic cycle. Despite this they brought in a €1.1 billion net profit for the half year.
This is surely a bank "prospering", to use your word. AIB also set out in great detail their exposure to the development property sector - showing the level of exposure to each element of that sector and showing the loan to value ratios in each.
The loan to value ratio was approximately 70 per cent. This is hardly "reckless" lending!!
As recently as September 17th, Bank of Ireland issued a pre-close statement on their performance for the half-year to September 30th.
They indicated that profits for the half-year would be slightly less than the same period in 2007.
They also indicated that their bad debt writeoff would be higher - but in the region of the mid-40s basis points for the full year.
This would see them with writeoffs in the full year of approximately €640 million but still leave them with expected net profit of €1 billion for the year.
Again a satisfactory result given the economic position.
Bank of Ireland also outlined their exposure to development property lending - though as this was a pre-close trading statement they did not give as much detail as AIB. Nonetheless their exposure is quite limited and in many cases cross-collateralised and backed by personal recourse.
Again this bank seems to be prospering despite the economic downturn. On Budget Day the Financial Regulator gave his assessment of the level of development lending at €15 billion across all banks in Ireland.
You and the other commentators seem to forget the property developers made enormous profits during the boom years and are probably in a very good position to weather the present storm and profit again on the next upswing.
I am amazed that neither you nor the many pessimistic commentators don't seem to have read these publications or listened to the Financial Regulator or the Central Bank chief.
Can you show evidence of the bad lending? Name a few major players who have gone under, with banks taking massive writeoffs.
Amazingly I have seen none mentioned in your columns!! Should this alone not give you reason to question the "reckless lending " claims? - Yours, etc,
PAT HAMELL,
Roundstone,
Co Galway.