State of denial
Plenty of comments posted via the website in response to this morning’s business opinion column on the recap. A selection are re-posted below, with names withheld.
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No reality distortion field at Macworld
So three weeks before the event Apple confirms that next month’s Macworld will not feature the customary Steve Jobs keynote and instead the Apple faithful, and the press, will have to contend with Philip Schiller, Apple’s senior vice president of worldwide product marketing unveiling its new products. No doubt to distract from speculation about Jobs’s health the company has also announced it will be its last Macworld.
So no “one more thing”, no feverish applause for iPods in different coloured iPods (as only Jobs can elicit) and I’ll be heading down to CES in Las Vegas a lot sooner. The plan had been to cover both Macworld and CES as they are in the one week but with no Jobs, and no earth shattering product announcements expected, I’ll be over loading on the latest gadgets at CES instead.
I’ll leave you with the Simpson’s take on a Jobs keynote.
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Bleed the world
Hard to know what to say…..an interesting take on a modern classic
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Share price says the game is up for Anglo Irish Bank
We have had several comments on Monday’s business opinion on Anglo Irish Bank posted via the business site. We have posted them belows as comments to this posting. The authors’ names and emails have been withheld as were have not been in position to confirm that they are happy for them to be published.
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Will Lenihan seek banker resignations in return for capital?
Minister for Finance Brian Lenihan said in an interview with RTE yesterday evening that there would be some “tough” decisions ahead for the banks in response to a question about management changes at the institutions. He’s clearly hinting that some of the senior management teams at the banks may not be around after the State injects capital through this recapitalisation programme of up to €10 billion announced yesterday evening. It’s no surprise therefore that some of the banks have been resisting private equity investments and even any potential capital raising from their own shareholders over recent months.
The prospect of shutting down lending in a bid to bolster capital is not finding favour within Government at a time when credit rationing is the last thing that most small and medium-sized businesses are struggling to keep cash flowing.
There is much at stake at present. The State is setting up a mechanism where €10 billion should get the banks up to capital ratios of the 8.5 per cent which will appease the market as these levels have become the norm since the UK bank capitalisation. However, the State is setting conditions on its investment “in order to safeguard fully the interests of the taxpayer.” (more…)
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Is French bank BNP Paribas eyeing an Irish investment?
Weekend press reports suggest that BNP Paribas is being sounded out for a possible investment in one of the guaranteed financial institutions, with one newspaper reporting that EBS building society was in its sights.
We understand that local Dublin management at Postbank, the Irish savings bank which is jointly by An Post and French BNP Paribas, made contact with EBS in recent days to ask tentatively about a possible alliance with the building society, though EBS appears to be far more focused on a potential merger with Irish Life & Permanent and both parties are still in talks.
It is not clear whether BNP Paribas is itself interested in an Irish investment or if the local managers at Postbank are just seeing what potential mergers are out there. BNP Paribas would appear to have plenty on its plate taking control of the Belgian-Dutch financial services group, Fortis, without seeing what else is out there in terms of other investments.
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Government aims for up to €10bn for recapitalisation programme
The Government has been accused (by Fine Gael finance spokesman Richard Bruton) of buying time on recapitalisation with the announcement of a recapitalisation of up to €10 billion for the guaranteed Irish banks. This should be enough to bring the Irish banks’ capital up to UK levels since the British banks were bailed out in a £50 billion recapitalisation programme, but Bruton is certainly right. After weeks of in-depth negotiations, we are none the wiser on the cost or size of the State’s investment.
Banking analyst Scott Rankin at Davy stockbrokers described it as ”a holding statement”, as it was very light on details, though he said it would go “some way to restorig calm as we head into the Christmas break.”
Is Minister for Finance Brian Lenihan not kicking to touch or at least deep into the banks’ half with his latest announcement on recapitalisation? He says he will examine their proposals for capital raising on a case-by-case basis from each of the guaranteed institutions and that the State can inject capital in return for either preference and/or equity shares, or by the State under-writing a rights issue where new shares are offered in a bid to raise capital. The last option is nationalisation by another name, as in this climate the Government is really the only investor in town, or least one of the last remaining ones. The State will ultimately end up taking most of the shares, as happened with recent rights issues in the UK. (more…)
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Halifax ploughs different course from parent
Halifax-Bank of Scotland (Ireland) seems to be playing a different game from its UK parent bank, Halifax. Mark Duffy, chief executive of HBOS Ireland, says in an interview in today’s business section in The Irish Times that the bank will pass on all future interest rate reductions from the European Central Bank (ECB) expected next year. (more…)
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Carphone Warehouse founder makes wrong call
Fiona Walsh’s London Briefing today looks at the glittering career of Carphone Warehouse co-founder David Ross who has had to step down after using his equity to guarantee personal loans.
“As for Ross, is he very bad, very stupid or simply forgetful? Whichever it is, his reputation is in tatters over his failure to disclose that he had pledged millions of pounds of shares in companies where he served as a director as collateral for personal loans. The bulk of the shares used as collateral by Ross - worth about £160 million at current prices but far more when the pledges were made between 2006 and 2008 - were in Carphone Warehouse, where, until Monday, he was deputy chairman.
But Carphone is not the only company to be dragged into the scandal. Ross failed to tell fellow directors in three other firms that he had used his stakes to raise further cash for his personal business interests. National Express was the most prominent of these. The other two were storage company Big Yellow and Cosalt, the Grimsby-based marine safety company.”
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Brian Lenihan’s Patriotism
Northern Property developer - and Newry shopping center owner - Gerard O’Hare has a pop at Brian Lenihan and his call for shoppers to be patriots and eschew the bargains to be had north of the border this Christmas in Francess McDonnell’s Belfast Briefing Column today.
To quote Dr O’Hare:
”This is not about politics, it is about economics and those who are in charge of economics. This is all about bringing the benefits of two economies on the one island together and making the most of it.
“That is what modern-day Ireland is about, and anyone who goes back to patriotism in the sense of nationalism is harking back to 1916 and 1921, when two-thirds of the island got themselves sorted out from the English hierarchy on that occasion and forgot about the rest of us for 60 years - don’t forget about that, Brian Lenihan - and I am not a republican”.
Over to you Minister….
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…and the winning bank is
So a few people are getting hysterical about whether the Irish banks are going to pass on the ECB’s record 0.75 per cent interest rate cut. Storm in a tea cup. Some of the banks always prevaricate for a few days after a rate cut and this time it’s no different. Unlike the UK where many tracker mortgages have a “collar” - a rate below which the lender has told you it will never go regardless of ECB/Bank of England rates - they aren’t a feature of the Irish market.
But back to our little highly unscientific competition to see who was the first lender to pass on the good cheer to mortgage holders. Yesterday three of the big lenders - AIB, Bank of Ireland and Halifax-Bank of Scotland (Ireland) - said they would pass on the reduction to mortgage holders. The official announcement of the ECB rate cut hit our in-box at 12.46pm. At 12.51pm AIB’s communication arrived to say they would be passing on the saving to “all owner occupier variable rate mortgage customers”. At 1 o’clock on the dot Bank of Scotland (Ireland) and Halifax’s communication arrived while Bank of Ireland waited until 17.41pm to share the news.
First out of the blocks this morning were the EBS while PermanentTSB confirmed the cuts about an hour ago. Expect the rest to follow later.
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A martyr for the Beamish - but let’s try not be bitter
Barry O’Halloran
A few years ago, when I worked for another newspaper, there was a rumour one day that a member of the Rolling Stones - possibly Ron Wood - was drinking in a pub on Cork’s northside (which gives away which paper employed me). A colleague was sent off to investigate, on his way out, he remarked drily that Wood must be “a martyr for the Beamish”.
It’s unlikely that Wood - or any other Rolling Stone - had heard of Beamish & Crawford, whose main market was, and probably still is, in Cork. In the tail end of a three-way deal done very far from there, it is about to be absorbed by Heineken Ireland, which brews its local rival, Murphy’s Stout, with the loss of 120 jobs. A decision that most would say was inevitable.
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Anglo loses out to Permo as third largest Irish public bank
Anglo Irish Bank is enduring another tough day on the stock market after posting a 37 per cent drop in pretax profits to €784 million yesterday on the back of significantly increasing the amount it is setting aside to cover losses on loans in the coming years.
The stock was down 18 per cent to 55 cent at lunchtime today, valuing the bank at €416 million, slipping below Irish Life & Permanent’s market capitalisation of €423 million, and losing its place as the State’s third largest public bank to Permo. Investors are clearly not happy about the news from Anglo. This values Sean Quinn’s family stake at about €62 million, far below the €715 million the stake was worth when he converted to actual shares in August. Of course, this doesn’t take into account the losses the family made on the stock when they held their interest in the bank through the highly-leveraged (and highly risky) contracts for difference derivative products over the last two years.
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Consolidation - the banking ballroom of romance
As various US private equity firms and Middle Eastern sovereign wealth funds circle the Irish banks (and Bank of Ireland and Irish Life & Permanent in particular) and a home-ground solution to recapitalisation has emerged in the form of a rival group of local institutional investment funds, Anglo Irish Bank has said mergers are not for it.
David Drumm, chief executive of the bank, said at Anglo’s full-year results yesterday that “consolidation was not on our agenda”. Asked if he saw the six Irish-owned banks and building societies being merged into two big banks, Drumm said he would “struggle to see” a need or rationale for consolidation or a two-bank Irish system. Drumm sent an email around to staff on November 21st about this topic when there was much debate around consolidation in the banking sector. Here’s what he said: (more…)
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Stress-testing Anglo Irish Bank’s loan book
Anglo Irish Bank painted a dark picture of a worst-case scenario at the bank and what might happen to the bank’s loan book if things really go pear-shaped.
The bank said that in a worse-case scenario it could lose between €1.28 billion and €2.76 billion on loans between 2009 and 2011 but could still maintain annual profits at the level announced yesterday (€784 million) for the year to the end of September 30th, 2008. (more…)
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From Titanic to Temple Barf: how to keep tourism ticking
Just as the frequent flyers of the western world collectively take one look at their bank accounts and decide that 2009 is the year they will sit out their annual leave with a DVD box set and a bottle of Aldi wine, the Government has announced that it is setting up another high-level group to muse in a high-level manner on the ways in which Ireland can boost its tourism numbers up to, um, a high level.
The Tourism Renewal Group, which will be chaired by ex-Quinnsworth and ex-C&C boss Maurice Pratt, has been asked by Minister for Tourism Martin Cullen to “set out a framework for action” to ensure that our tourism industry doesn’t wither. It’s an important task: last year, tourism accounted for 4 per cent of the Republic’s gross national product (GNP), employed more than 250,000 people and spun revenues of more than €6.5 billion.
So, apart from building, fixing and cleaning public toilets in key tourist destinations, where should the Tourism Renewal Group start? Here are five steps that could keep tourism ticking: (more…)
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What would airline mergers mean for the kangaroo route?
News that British Airways is mooting a merger with Qantas just one day after Ryanair made an offer for Aer Lingus naturally gives rise to all kinds of pertinent thoughts about the end of the national airline model, as well as lending uncomfortable weight to the idea that Michael O’Leary is right that the shamrocks brigade can no longer fly solo.
But if you’ve got family members living on the other side of the world, there is only really one (purely selfish) question that matters: so what would a BA-Qantas tie-up mean for my journey from Ireland to Australia? (more…)
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Taxing times
Fine Gael finance spokesman Richard Bruton opted for “calamitous”. Labour Party equivalent Joan Burton plumped for “ruinous”. The November exchequer returns data released today was, Minister for Finance Brian Lenihan admitted, “poor”. In fact, they confirmed our “worst fears”, said Ulster Bank economist Pat McArdle.
So what happens now? Judging from Mr Lenihan’s statement today, he is sticking to his chosen strategy of chasing further cuts in current spending, with the Special Group on Public Service Numbers and Expenditure Programmes, forever destined to be known as An Bord Snip Nua, having already begun its review of how the Government spends / wastes the tax we pay. Other options include flogging off public assets or further tax hikes to balance the books. (more…)
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November numbers
The cold hard numbers in the Department of Finance’s monthly Exchequer returns data - due out later this afternoon - have tended of late to show the public finances in such a poor state that the political implications, from Opposition attacks right the way up to EU diplomacy level, overshadow the often interesting detail contained in the statement.
The shortfalls in the various categories of tax show with bleak precision exactly what is going wrong with the economy. (more…)
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Energy bills - the only way is up
Barry O’Halloran
If you no longer have the energy to keep up with, well, energy prices, join the club. Four months ago, there were double figure increases on the way for consumers and small businesses, with more to follow in January. Now, the second round of increases will not happen next month, and there is likely to be a slight fall in electricity charges.
It’s all down to the price of oil, gas and coal on world markets, with oil being the benchmark. From the point of gas prices, that’s pretty straightforward, Bord Gais, which supplies around half a million households and 1,700 businesses, buys the fuel at market prices and sells it to its customers. As the ESB uses gas, oil and coal, it’s a bit more complex, but the basic rule is that three out of every four euro that the company spends goes on power generation, which requires gas, oil and coal. (more…)
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Banks must stay in Irish hands
In his BusinessOpinion column this week, business editor John McManus argues that the government must keep the banks in Irish hands, not least because Irish-owned banks are more inclined to lend to indigenous businesses.
“All this will no doubt play out in the coming weeks, but as things stand, the Government has reason to be pleased with itself. The Irish banks have been galvanised into action and are confronting the reality that they will not all survive the process as independent entities. The second is that they have managed to turn what could have been a fire sale of the banks into something that has an element of competition and the prospect of only a minimal need for Government funds.
Whether they arrived at this juncture by accident or design is not terribly relevant, but what is important is that from here on out they do not lose sight of the need for the banking industry to remain Irish-owned and Irish-run.”
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