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Consumer spending falls in February

Consumer spending has fallen for the second time in three months, according to Visa’s Irish Consumer Spending Index.

Having risen slightly during January, consumer expenditure was down by 0.6pc on a year-on-year basis.

This was the sharpest reduction in real spending recorded for two years, as falling consumer confidence continues impact spending habits.

The fall in spending comes on the back of growing concerns about the potential impact of a possible no-deal Brexit, as well as research from Bank of Ireland this week, which found that one in three people are “very worried” about their finances.

Meanwhile, last month sentiment among consumers fell to its lowest level since November 2014.

Face-to-face consumer spending fell by almost 4pc year-on-year in February, however in contrast eCommerce spend rose 5.6pc on an annual basis.

Last month consumers increased their spend on household goods and hotels and restaurants and bars, which recorded growth rates of 7.6pc and 6.7pc respectively.

There was also some growth seen in health and education, up 3.2pc, and a modest increase seen in recreation and culture, which recorded growth of 1.2pc.

However, spending fell in all other categories covered by the report, most notably in the traditional retail categories of food and beverages, which was down 1.3pc, and clothing and footwear, down 3.8pc.

This was the first decline reported in the food and beverages sector in 18 months.

The sharpest reduction in spending was for “miscellaneous” goods and services. This segment includes jewellery, health and beauty.

Expenditure in this category was down 5.3pc, a fall that was broadly in line with January’s four-year record fall.

Philip Konopik, Ireland country manager, Visa said: “While the likes of the hotels, restaurants & bars and recreation & culture sectors saw a boost in February thanks to the mid-term break and Valentine’s day, this failed to drive sales on the high street with spending down -3.9pc year-on-year.”

“Overall it represents a sluggish start to the year, so hopefully we will see an uptick in consumer spending to coincide with St Patrick’s day.”

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An Post lines up mortgage market entry as profits rocket

An Post is looking to launch its mortgage product in the spring of next year, it said on Wednesday when announcing a loan product that offers up to €75,000.

At a briefing in the GPO, the company’s head of retail, Debbie Byrne, said its consumer lending product will go live this month, allowing customers to borrow between €5,000 and €75,000 on terms ranging from one year to seven years.

The loan offering is through Avantcard and has a tiered interest rate starting from 8.5 per cent depending on a person’s credit rating.

Speaking to journalists, Ms Byrne said the company’s mortgage product will launch early in 2020.

Ms Byrne’s comments came after chief financial officer Peter Quinn said turnover in 2018 rose 6.8 per cent to €897 million while profit grew from €8.4 million in 2017 to €40 million in 2018.

The company is in the throes of a sizeable investment in its brands and product offering with financial services and e-commerce central to its strategy. With that in mind, An Post is launching a sub-brand called An Post Money, supported by a series of advertising campaigns. In total An Post is spending €5 million on a refresh of its brand. Its new advertising campaign begins this weekend.

An Post services about 1.5 million customers per week and processed €14 billion worth of transactions last year. It recently closed 152 of its branches, leaving it with over 950 branches across the State. Ms Byrne noted that their will not be any compulsory closures across its network.

“An Post’s move into a new world of e-commerce and financial services has delivered great results in 2018,” chief executive David McRedmond said, adding that its transformation was helped by “fixing our core economics”.

Another key plank of its growth strategy is ensuring that more government services are processed through regional post offices. While a move of the TV licence to Revenue from An Post had been mooted, Ms Byrne noted the organisation grew TV licence revenue by 1 per cent last year, delivering “an additional €1.8 million to RTÉ’s coffers”.

While revenue from mail services has witnessed a global decline, An Post recorded growth of 40 per cent in its parcel business last year with Christmas parcel deliveries up 60 per cent on the previous year.

Garrett Bridgeman, An Post’s managing director of mails and parcels, said the group is now the market leader in the parcel sector in the Republic with a share of over 40 per cent. He added that the company has just invested €15 million in a new parcel automation centre which is due to open in September.

Another new sub-brand, An Post Commerce, has been launched under Mr Bridgeman’s remit to provide solutions for domestic and international businesses.

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One-in-three people admits being ‘very worried’ about their finances

A third of people in this country are “very worried” about their finances.

More than half also have no pension, according to research commissioned by Bank of Ireland.

One in four would not last a month without having to borrow if they lost their main source of income.

The bank is spending €5m this year to roll out a financial literacy programme for customers and non-customers.

A survey of 2,770 people the bank commissioned from Red C found the country has a national financial wellbeing score of 61.

This means that as a nation we are managing financially, but not thriving.

A quarter of those struggling are classed as high earners, so-called ABC1s.

The research found that what people earn does not determine how they cope financially, but how they use the money. Half of consumers do not feel confident about managing their money.

Many people feel financial advice is relevant only to those with large amounts of money to invest, something that money experts would question.

Around one-in-five consumers admits to being regularly overdrawn. The majority of those surveyed said that they hold some form of loan, with one in four saying they have two loans.

“Financial wellbeing is about what you do with your pot of money, not the size of it,” said Gavin Kelly, chief executive of the retail division of Bank of Ireland.

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EU adds 10 countries, including UAE, to tax blacklist

The European Union expanded its tax haven blacklist by 10 countries today, adding the United Arab Emirates and Bermuda despite the objections of powerful member states such as Italy.

The list now contains 15 countries.

It was first drawn up in 2017 in the wake of several scandals, including the Panama Papers and LuxLeaks, that pushed the EU into doing more to fight tax evasion by multinationals and the rich.

Seven countries are to be moved back from a grey list because reform commitments had not been met.

These are Aruba, Belize, Bermuda, Fiji, Oman, Vanuatu and Dominica, an EU statement said.

They are joined by three other countries whose tax policies have grown more aggressive in the past months. They are Barbados, the United Arab Emirates and the Marshall Islands.

Italy long resisted the addition of the UAE.

The Middle East powerhouse has recently made significant investments in the economically troubled European country.

Rome had wanted to keep the Emirates on the so-called grey list of countries that have made pledges to get their tax laws in order with a standard set by Brussels.

“Everything will be solved” when new legislation in passed in the UAE, Italian Finance Minister Giovanni Tria said.

“The Emirates will come out immediately afterwards,” he added.

The operation in “naming and shaming” countries into better tax policies comes only days after a money-laundering blacklist by the EU was torpedoed by the bloc’s own member governments after it included Saudi Arabia.

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Sterling plummets after UK attorney general says legal risks of Brexit unchanged

The pound sank in volatile trading today after Britain’s attorney general said the legal risks of a Brexit deal with the European Union had not changed.

This cut the chances of the agreement getting through the British parliament.

Geoffrey Cox said a revised Brexit deal, secured by Prime Minister Theresa May last night with the European Union, had not given Britain legal means of exiting the so-called Irish backstop arrangement.

Markets had pushed the pound to a 22-month high versus the euro higher before the attorney general spoke.

They had expected him to revise his view of the deal and help win over eurosceptic lawmakers in May’s Conservative Party before this evening’s parliamentary vote on her withdrawal agreement.

With no clear path yet to an orderly British exit from the EU less than three weeks before the official departure date, the pound remains at the mercy of Brexit headlines.

The pound was down 0.9% against the dollar at $1.307 by the evening. It had been as high as $1.3290 earlier in the session.

It also plummeted more than 1.3% against the euro to 86.4 pence after earlier trading as high as 84.755 pence.

Overnight volatility in the pound shot to its highest since shortly after the Brexit referendum in June 2016.

The export-heavy FTSE 100 index rose as sterling dropped.

Britain’s parliament voted down May’s deal by a record 230 votes in January.

Analysts said earlier that sterling was gaining because whether politicians vote for or against May’s deal at the second attempt tonight, the likely outcome will diminish the chances of a potentially chaotic no-deal scenario.

If May loses today’s vote, she will face another vote tomorrow on whether parliament wants to leave the EU without a deal, with a majority expected to refuse the “no-deal” scenario as economically disruptive.

A third vote would then be held on Thursday on whether Britain should request from the EU a limited extension of the March 29 Brexit date.

Traders are expecting big swings in the currency around this week’s votes, according to a sharp rise in one-week implied volatility.

One-week implied volatility measures demand for options to hedge against big currency swings.

A higher percentage reflects greater expectations of currency movements over the next seven days.

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Sterling rises as traders position for Brexit showdown

Sterling rose today in volatile trade as investors braced for parliamentary votes on Prime Minister Theresa May’s Brexit’s deal that could decide on what terms – if at all – Britain leaves the EU in less than three weeks.

No breakthrough emerged from weekend talks between the British government and the EU.

As a result, in a vote tomorrow evening lawmakers are expected to reject – for a second time – the withdrawal agreement May negotiated with Brussels last year.

If that happens, she will face another vote on Wednesday on whether parliament wants to leave the EU without a deal, with a majority expected to refuse the “no-deal” scenario as economically disruptive.

A third vote would then be held on Thursday on whether Britain should request from the EU a “limited” extension of the March 29 Brexit date.

Analysts said that a delay to Brexit would be modestly positive for sterling, reflecting the reduction of the risk of hard Brexit.

However they said it would not completely eliminate the hard Brexit risk which could still come at the end of a delay or as a result of a second referendum.

Sterling was up 1% at $1.315 this evening after falling in the previous eight consecutive sessions. However it was down 1% against the euro at 85.5 pence.

Earlier in the session, the pound fell after a Sun Newspaper report said May would change tomorrow’s key vote on her Brexit deal to a less decisive provisional vote, raising the prospect of more uncertainty for the struggling currency.

May’s spokesman then said the vote would go ahead as planned.

Britain is due to leave the EU in 18 days and the pound has weakened in recent weeks as doubts swirl over how, or possibly even if, Britain’s exit will take place.

Most economists expect Brexit to be delayed by a few months and the two sides to eventually agree a free-trade deal, according to a Reuters poll.

Traders are expecting big swings in the currency around this week’s votes, according to a sharp rise in one-week implied volatility.

One-week implied volatility measures demand for options to hedge against big currency swings.

A higher percentage reflects greater expectations of currency movements over the next seven days.

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Extra capital needs behind high mortgage rates here

Mortgage holders here pay more for their loans than other borrowers around Europe, partly because of the high level of loss-making trackers still in the banking system.

That’s according to a report from the Department of Finance, which looked at the reasons for the disparity between mortgage rates here and elsewhere.

“Trackers, which are still just over 40% of all mortgages outstanding, help explain why the average overall mortgage interest rate in Ireland is nearer 2.5% according to ECB data, with the European average at around 2.1%,” it says.

But the report says that while it is widely known that Irish borrowers pay more for home loans than others in Europe, what’s less well understood is that the lenders here must carry more capital per mortgage than banks elsewhere in the EU.

This, the study says, is the consequence of the very high level of historic losses in the financial institutions here.

In 2017 the Competition and Consumer Protection Commission described the Irish mortgage market as quite dysfunctional from both a competition and a consumer perspective.

It added that it did not believe there are immediate remedies that will reduce mortgage rates and fix the other dysfunctional aspects of this market.

In actual terms, the department’s analysis shows that banks must hold up to three times more capital on mortgages than their peers in Europe, and this difference results in interest rates that are up to half a per cent higher here.

When it comes to a new mortgage lent today, for example, a bank here may have to hold up to five times more capital than they would have on a similar loan issued 12 years ago.

This, the report says, is despite the lower risk attached to loans issued today, because of the more stringent lending conditions that are in place.

The knock-on effect, according to the study, is that lending margins need to be higher in order to achieve an acceptable return.

The report says that as Irish banks reduce their bad loans, the risk weightings on such loans will fall, allowing rates to fall.

But it cautions that performing loans will continue to carry a higher than average risk weighting for years to come, until the financial legacy of the crash works through the system.

Minister for Finance Paschal Donohoe has asked officials to probe whether any changes can be implemented which would result in the cost of the extra capital being reduced, so that interest rates can fall.

Trackers are not considered to be the only reason behind high mortgage margins here, with the Central Bank also pointing previously to the high concentration and low level of competition in the banking market here.

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Grocery prices rise with further increases likely

Grocery prices rose 1.5pc in the 12 weeks to February 24, and further increases are likely on foot of Brexit, according to market researchers Kantar Worldpanel.

Extra customs paperwork plus any tariffs that emerge will make British goods more expensive for Irish importers, Kantar’s consumer insight director Douglas Faughnan said.

It was the fourth period in the row where prices went up.

“While branded sales have remained resilient despite higher prices, growing at 3pc and accounting for 47.3pc of overall sales, continued inflation may drive Irish consumers to trade down to cheaper own label ranges which are already growing at 4pc in the latest 12 weeks,” Mr Faughnan said.

The figures showed Dunnes retained its position as biggest supermarket by market share, on 23pc. Tesco was second on 21.6pc while SuperValu was third on 21.3pc.

They will face a fresh challenge from the German discounters if inflationary pressure emerges.

“Shoppers may opt to save money by moving more of their spend towards the retailers they perceive as offering better value. Each of the five major supermarkets played host to at least two-thirds of the population in the past 12 weeks, demonstrating that Irish shoppers are already prepared to shop around for the best deals. Retaining the loyalty of their existing shoppers will be a key priority for retailers in the face of increased price pressure,” Mr Faughnan said.

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‘Memo to Safety Commissioner’

What kind of Online Safety Commissioner will the Government actually appoint? A powerful watchdog? A lame duck? Something in between?

Communications Minister Richard Bruton talks about an office with the power to fine Facebook, Twitter or YouTube, or even spark a criminal prosecution.

But to be effective a new commissioner has to do a few things.

The first is understand the technology. Too many senior figures in Ireland have digital literacy problems. The recent Momo hoax was a prime example of this. A good deal of energy (and, in some cases, credibility) was wasted chasing after a ghost. A safety commissioner needs to know a non-threat just as much as a genuine one – and to be able to step in to reassure an anxious public.

They also need to be pragmatic, even while talking tough. One of the biggest image problems the Irish Data Protection Commissioner’s office had in its early years was an impression it was too close to the big tech firms. One reason for this was that the office made itself available for ‘consultations’ with the Facebooks of this world. But while German privacy advocates sneered at us, this may have led to bad products being canned or changed before they were released, saving millions of people from a bad outcome.

As recently as last week, the current Data Protection Commissioner, Helen Dixon, reiterated this. Potentially harmful or unlawful services are ditched, she told me in an interview, because of consultative meetings with her office. (She mentioned one in particular that had been sent back to the drawing board following a meeting last month.)

A safety commissioner has to prioritise a better end result for kids, even if it means getting under the hood with big online firms. It is ultimately more effective than public relations optics or applause from Sunday radio show panels.

That said, one thing the new safety commissioner should not worry about is offending the tech firms. There is a trope that officials have to be nice to Facebook or Google for fear of offending their investment plans here. In my experience reporting on the sector over two decades, this is largely illusory. No big tech firm will make a decision to pull 5,000 or 10,000 people out of a country’s headquarters because a safety commissioner talks tough. They will especially not do this if they believe that modifying a product, service or online process will prevent further problems in other European countries. That’s not the way these big companies think. Especially on non-tax issues.

That said, there are going to be quite a few frustrating limitations.

Domain is one. The new office will have a direct line into Google (YouTube), Facebook and Twitter. They’re all headquartered in Dublin. But many popular platforms aren’t. Snapchat is the prime example – it remains the most-used social network by teens and kids with around a million accounts here.

The safety commissioner also surely needs to have a strategy to deal with smaller – but growing – platforms such as TikTok. (If you haven’t heard of this but have kids, look it up.)

Then there are some platforms with controversial histories, such as, which was at the centre of a storm over bullying and suicides a few years back.

Will a commissioner simply shrug his or her shoulders and say it’s not in their geographical domain?

Australia’s eSafety Commissioner, repeatedly referenced by Bruton last week as a potential comparison to Ireland’s proposed body, says clearly that it is often geographically limited. For example, in the instance of intimate or compromising images posted as revenge or an act of harassment, the Australian body says it can only help in cases where both victim and aggressor are resident in the country and the image is hosted there, too. Ireland’s online safety commissioner needs to have a strategy to deal with that.

So who fits the bill?

Someone like Johnny Ryan of the privacy web browser company Brave might do a good job. One of Ireland’s undisputed internet experts, he recently showed a lot of effectiveness in challenging Google and the Interactive Advertising Bureau on the topic of targeting vulnerable individuals with ads.

Some working in the field of internet safety, such as Simon Grehan, might also be a natural candidate. As would those who currently lead childrens’ safety organisations, such as Childrens’ Rights Alliance boss Tanya Ward or Cybersafe Ireland’s Alex Cooney.

A really innovative choice might be Dylan Collins, one of Ireland’s most experienced and knowledgeable tech founders who is currently growing his successful ‘kidtech’ firm SuperAwesome. Unfortunately, because that company appears to be doing well building products which protect children from being targeted by online ads, he would be very unlikely to consider the post.

(None of these people are friends of mine, by the way – I mention them solely based on professional interaction and reputation.)

To be fair to the Government, the time is right to do this.

Facebook knows which way the wind is blowing, if last week’s ‘privacy first’ memo from Mark Zuckerberg is anything to go by. YouTube does too. Two weeks ago, it announced it will soon ban all comments on all videos which show young children. The subsidiary of Google said it was doing this because of “predatory” comments being left on the videos, which sometimes acted as a resource for paedophiles.

This is an unprecedented move – the biggest I can remember in covering social networks and online video platforms.

It shows that there’s an open door for a decent Online Safety Commissioner to effectively protect kids in a way which hasn’t been done before.

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BOI prepares sale of up to €800m in bad loans

Bank of Ireland is planning to sell up to €800m worth of non-performing loans this year as it moves to bring its balance sheet in line with European norms.

The bank had consistently ruled out any loan book sales – until CEO Francesca McDonagh switched her stance last July. At the time she said that the bank’s view on loan sales had to change “because the regulatory environment has changed” and stated that it was open to all options in relation to a reduction of bad debts.

Now, Bank of Ireland has earmarked between €600m and €800m worth of buy-to-let mortgages that will be either sold or put up for securitisation. The news was in the bank’s presentation to investors last month on its 2018 performance.

Bank of Ireland reduced its non-performing exposure (NPE) ratio to 6.3pc of its overall loan book last year, the lowest level of any of Irish bailed-out banks.

The bank’s level of NPEs dropped by 24pc last year to €5bn. It intends to reduce that ratio further to 5pc by the end of the year through a mix of sales, securitisation, and other methods.

A spokesman for the bank told the Sunday Independent that it expects to reduce its NPEs this year by between €1bn and €1.2bn. AIB is also in the process of an NPE sale.

Credit analyst at Davy Stephen Lyons said the impending loan sale was off the back of continued regulatory pressure from the European Central Bank (ECB).

“We saw this pressure last year where, as part of the ECB’s review of Bank of Ireland’s capital models, the bank was told to set aside more capital for its mortgage portfolio,” Lyons said.

“We are now seeing further regulatory pressure, whereby Bank of Ireland is being told to start increasing on an annual basis the money that it sets aside for bad loans, to a level beyond what the bank believes is required, which thereby encourages the bank to resolve these loans as soon as is possible.”

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