Released March 6th, 2014
DUBLIN: The world of e-commerce is exploding across the EU. In 2011, the EU surpassed North America as the largest e-commerce market in the world. As a percentage of marketing budgets, digital marketing will rise sharply. And as a percentage of that, email marketing will rise significantly. But not all email is the same. 2014 will go down as the year of ‘big data’.
MNCs are already focusing on it as a key differentiator and Government organisations are beginning to take note. Leading academic centres are allocating an increasing amount of resources to study and develop collaborative efforts.
Organisations that successfully fuse data insights technology and effective data analytics that will leap ahead and achieve critical success.
Report copy available on request and subject to availability.
Please register your interest for a FREE copy:
Bank of Ireland suffered a pretax loss of €569m last year but is now profitable, the bank said earlier.
Bank of Ireland is the dominant bank in the country and the only domestic bank to avoid outright State control.
Before the cost of the now-expired Irish government’s bank guarantee, Bank of Ireland said its net interest income was about €2.13 billion in 2013, after €1.75 billion in income a year earlier.
The government, which phased out its industrywide banking guarantee in 2013, had hailed the sale of €1 billion in so-called contingent convertible, or Coco, notes, early last year, and the disposal in December of €1.84 billion in preference shares it held in Bank of Ireland, as signs that normality is returning to Irish banks.
Lack of competition earns bank greater margin
Analysts say Bank of Ireland’s return to profitability has been helped because so many lenders have shut down or have been liquidated, and there is now only limited competition for banking services in Ireland.
Bank of Ireland said its net interest margin of 1.84% last year was up sharply from 1.25% in 2012.
Need for greater competition
Citing a lack of lending competition in the Irish market, Bank of Ireland CEO, Mr. Richie Boucher said he would welcome a new banking force in Ireland, saying having just two big banks in AIB and his own lender is too few for the economy.
Speculation on future of Ulster Bank
But in a reference to speculation around Ulster Bank’s plans here he waned that banks need to make clear their position so that customers can plan.
‘Its not helpful…whether they are in or out,’ he said.
The latest figures from the IBF Mortgage Approvals Report, published by the Irish Banking Federation (IBF), show that 1,587 mortgages to the value of €276 million were approved in the three months ending January 2014.
The following are the key elementsA total of 1,587 mortgages were approved in January, of which 1,477 (93%) were for house purchase. The number of mortgages approved showed a year-on-year increase of 10.8% and a month-on-month fall of 9.9%. The value of mortgages approved in January was €276 million of which €266 million (96%) was for house purchase.
The value of mortgage approvals increased by 16.2% year-on-year and fell 12.8% month-on-month.
Permanent TSB is set to launch a new mortgage product allowing existing mortgage holders to move property, take their negative equity with them AND keep a proportion of their tracker mortgage.
Already, Bank of Ireland, AIB/EBS and Ulster Bank offer various forms of negative equity arrangements to existing customers. See full list HERE.
Negative equity is greatest among homeowners that purchased their homes between 2003 and 2009. So, a homeowner that borrowed to buy their home in say 2007 may today have a mortgage balance of €300,000 where the property is valued at just €200,000 resulting in negative equity of €100,000.
For mortgage holders that stay in their homes, negative equity is not an issue as long as they can afford their monthly repayments. However, for many, especially those that may be ‘outgrowing’ a property as a result of a growing family, negative equity can be a major block to moving. As a result of the difficult economic conditions across Ireland, a majority of mortgage holders are unlikely to have the necessary cash to repay the outstanding balance on their mortgages after the sale of their home. This is what overwhelmingly creates a barrier to mobility.
Banks in Ireland seem to be paying closer attention to the dilemma and are beginning to respond. However, unlike banks in say, the US, where lenders there have special arrangements to write off a proportion of the negative equity (they refer to them as short-sales), banks in Ireland are engineering solutions where the full mortgage balance is repayable under new arrangements. These present a some key opportunities for banks here.
First, banks stand to get fully repaid.
Second, banks can use the negative equity mortgages to wean customers off loss making tracker mortgages.
In fairness, under the traditional rules of mortgage lending, it would be highly unusual that borrowers would keep any aspect of an existing mortgage when moving to a new property. Mortgages are linked to properties and not people so any borrower that can move to a new property and carry any proportion of a tracker mortgage with them is a big plus. To put this another way, the transfer of a tracker mortgage is effectively a form of debt write off as there is a loss in interest earnings by the bank from what is could earn compared to a standard variable rate loan.
Of course, as banks seem to be increasingly open to negative equity mortgages to qualifying borrowers their new arrangements are likely to decrease the real negative risk to the bank as it helps increase property sales and push up prices.
Negative equity lending is a bet that property prices will increase and since prices in Dublin are already on the up, it’s a bet the banks appear increasingly likely to win!
There was a double shot of positive news for Ireland today.
Economic recovery to accelerate
First, the European Commission predicts that economic growth in Ireland will accelerate through 2014 and into 2015. This mirrors a similar trend in Germany, the EU’s most powerful economy. According to the latest Commission report, Ireland will achieve growth of 1.8% in 2014 and 2.9% in 2015.
Interest rates to remain low
Inflation across the Euro area is expected to remain low throughout 2014 and into 2015.
Low inflation is good news for mortgage holders in Ireland where an estimated 400,000 hold tracker mortgages that are directly linked to the base rate of interest set by the European Central Bank.
Tracker mortgage holders have really benefitted from low interest rates over the course of the last few years with many mortgage repayments costing €250 – €350 less per month that they would be expected under normal conditions.
Obamacare, or the Affordable Care Act in the US which was advocated for and signed into law by President Obama may be about to cross the Atlantic.
A report carried in the Irish Times today states that Minister for Health, Dr. James Reilly and his Department officials have drawn up a White Paper on Universal Health Insurance (UHI).
Everyone in the country would be required to have private health insurance for at least a standard level of cover by one of a number of competing insurance companies.
Obamacare in the US has a similar requirement. Citizens there are required to buy health insurance from health insurance exchanges.
Under the Irish proposals, those who refuse to buy mandatory cover for a basic package would have the costs deducted from their earnings or benefits.
Obamacare has a similar provision where individuals who do not buy health insurance must pay a penalty.
Under the Irish proposals, citizens could also buy supplementary health cover for items not covered by the standard package, such as private rooms in hospitals.
Again, this is similar to Obamacare.
The exact composition of the standard package for Irish citizens will not be determined until after a comprehensive consultation process.
Generally, Ireland comes in middle-of-the-road in health insurance expenditure both on an absolute basis and PPP basis as well as out-of-pocket expenses within the OECD. However, these are based on 2011 figures, the most recent data set available from the OECD.
Private health insurance costs across Ireland have surged since 2012. In recent weeks, some of the largest health insurance companies have announced price rises of 20% or more on some popular plans.
According to the Irish Central Bank, around one fifth residential mortgages in Ireland are in a delinquent state while half of mortgage holders are in negative equity.
This makes the mortgage arrears crisis one of the most profound across the OECD.
To put this into perspective, the OECD comprising the following countries:
Australia, Austria, Belgium, Canada, Chile, Czech Republic, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Israel, Italy, Japan, South Korea, Luxembourg, Mexico, Holland, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdon and the United States.
In a new paper on the issue the Bank said many of the borrowers in a distressed state are actually in employment, although many are on temporary contracts and some have experienced a significant drop in income.
The bank added that in order to tackle the mortgage arrears crisis overall job security and labour market conditions must be tackled.
Later this year, financial education is due to be introduced into the UK curriculum for the first time.
Teaching young children the basic elements of money management is a powerful life skill. Introducing it into the formal schooling system will add significant impetus to creating a stronger understanding of how money works. But teaching money should not be the sole responsibility of teachers and the schooling system.
Parents too have an enormous role to play but they must start early.
There are two sides to effective money education; the formal and the informal.
The formal side will generally include topics such as simple and compound interest and the cost of goods using various types of interest, these are the ‘technical’ aspects of money that can be taught in a formal setting. In fact, the formal schooling system is probably the best place to disseminate this type of knowledge.
But there is a softer side to money that must be taught at home, and taught from an early age.
A relationship with money may sound a little vague but a ‘relationship’ with money is perhaps the most powerful of all lessons.
Put another way, teaching children respect for money and creating a connection between earning money and having it can establish a powerful link in the minds of young children. Creating a sense of ownership can be much more powerful than simply having it.
Aviva Health Insurance has just announced another hike in premiums, the second in less than 2 months with some policies set to increase by up to 20%.
This mirrors similar increases announced a few weeks earlier by Laya, Ireland’s second largest health insurance provider where policies are also set to rise by 20%. Glo, a smaller market player will also push up prices as will the Vhi, where it plans to increase prices by between 3 and 6%.
The private health insurance market across Ireland is a mess. An estimated 60,000 per year are dropping cover. Young people are failing to enter the market. Families burdened down with personal debt are dropping cover leaving the elderly to carry the burden.
For the health insurance market to work properly, it needs a healthy mix of all three.
The private health insurance market in Ireland is now developing all the hallmarks of an industry in rapid decline. Rising costs and declining membership are the ingredients of failure. An endless drip of multiple price hike announcements that arrive with increasing frequency numb the masses; many now believe it’s just a matter of time before the entire system comes to a grinding halt.
Consumers now face the harsh reality of choosing between paying a mortgage and keeping their homes or paying for a policy they may never use. ..and when they do, receive a level of service that is less than what they paid for. Lots of consumers (rightly) rationalise the public health system may not be so bad after all.
For many, continuing to pay for private health cover is becoming an emotive luxury they can no longer afford.
Marketing is a pretty simple process. There are some core rules which when followed, make it difficult to mess things up. When entering a new market, it’s important to develop a campaign that is culturally sensitive.
Not that this mattered to Energia, an energy company that wants to sell electricity to Irish families. It’s entire marketing team appears to have slept through all the core marketing lessons…and it shows in their work.
One of the essential rules of marketing is that humour can be a big risk. When entering a market for the first time (in this case the residential electricity market), it’s usually a good idea to put one’s best foot forward, tell the target audience of one’s key benefits and do it through standard marketing channels. Again, it’s back to those simple rules; state the benefits and state them often. If you want humour, sponsor a comedy festival!
There’s no shortage of topics to poke fun of in Ireland. The weather is a good starting point. With endless damp, cold nights, there are so many angles with which to have some fun…and sell kilowatts of cheap electricity in the process.
Cows! Now there is another. Did you know there are 6.2 Million cows in Ireland? Compared to the 4.6 Million people here, cows are in the majority. What creative mind couldn’t poke some fun at that! Imagine if cows decided to unionize and look for better work conditions…and warmer homes! What potential for a really unique campaign, especially for an electricity company looking to moooove some watts!
Yet Energia decided to ditch the rules. Instead of playing it safe, it pursued the worst marketing strategy in Ireland.
Creativity wasn’t on the radar. Instead, it decided to poke some fun at, wait for it…losing a job! Yes, Energia’s entire marketing team see humour in being made redundant.
HELLO!!! Has anyone in the Energia marketing team read the papers recently (or within the last 5 years for that matter)? 400,700 people are without a job in Ireland! The country is still in the midst of an unemployment crisis. Hardly the fodder for a bit of a laugh just to sell some cheap electricity! And it’s not just those that have lost a job but the countless youth that have failed to actually get one in the first place.
Piece of advice Energia. Ditch the marketing team, ditch the agency and focus on informing the public of your core benefits.
In the meantime, pink slips for the marketing team, now what a laugh that would be!