An Post banking venture faces tough market

An Post’s banking joint venture with Belgian giant Fortis faces a difficult start in the coming months after new figures showed the Post Office Savings Bank failed to retain most of the euro140 million paid out to its Special Savings Incentive Account (SSIA) holders last year.

An Post’s banking joint venture with Belgian giant Fortis faces a difficult start in the coming months after new figures showed the Post Office Savings Bank failed to retain most of the euro140 million paid out to its Special Savings Incentive Account (SSIA) holders last year.

Figures for the year ended December 2006, show An Post savers switched their money to other institutions when their SSIAs matured, as its savings bank struggled to match eye-catching deals from rivals such as AIB, Bank of Ireland and Anglo Irish Bank.

The bank’s total deposit base grew by just 3 per cent to just over euro1.5 billion last year.

Balances in non-SSIA savings accounts grew by 8 per cent, or euro99 million, just euro8 million more than the increase recorded in 2005, despite last year’s release of euro140 million held in SSIA accounts that had reached the end of their five-year term.

The growth rate of 8 per cent significantly lagged the increases in deposits recorded by other banks, which were about 15 to 20 per cent last year.

The savings bank is also expected to face an uphill battle to retain SSIA funds worth a further euro300 million, which are held in accounts that mature between now and April.

An Post selected Fortis for its joint venture following a beauty parade that was completed last year. It said it chose Fortis because the bank had considerable expertise in developing postal banking services.

The joint venture is due to begin operations in the coming months. Mainstream banks have aggressively targeted the market for retail deposits since the SSIA scheme began to unwind in May last year. Many banks are offering headline rates of up to 1.5 per cent above the European Central Bank rate of 3.5 per cent to prevent customer defections and poach business from rivals.

An Post, under new chief executive Donal Connell, has struggled to compete with a limited product range that pays savers less than 1 per cent for demand deposits.

It is also coming under pressure from the National Treasury Management Agency (NTMA), the government’s expert funding agency. The NTMA has frozen the euro28million annual fee it pays to An Post for attracting retail deposits on behalf of the state.