Inside the world of business
Bottom of barrel goes deeper with details on buy-to-let
THE IRISH banks’ exposure to the buy-to-let market has been one of the many factors behind the negative – to put it mildly – sentiment towards them.
Tuesday’s data from the Central Bank on personal credit put a figure on the sector’s total exposure to the buy-to-let market for the first time.
The figures were pretty chilling. Almost one in four mortgages – worth some €24.6 billion – is for a buy-to-let property. Two-thirds of those are on tracker rates and thus likely to be inherently loss-making.
Missing from the data was a third figure which is likely to have most analysts looking through their fingers from behind the sofa: the number of buy-to-let mortgages which are currently on an interest-only basis.
This information would give an indication of if and when the buy-to-let chicken is likely to come home to roost for the banks.
The perception is that many buy-to-let investors will throw in the towel or have to renegotiate once they shift from interest-only to repayment terms. Either way, the banks will have to face up to the losses on their foray into this particular aspect of the property boom.
The good news is that the exhaustive stress tests carried out on the banks earlier this year took into account the buy-to-let market and presumably some of the additional capital the banks are being forced to tackle or raise themselves is to cover these losses.
This in turn raises the question as to why the Central Bank held back from giving details of the interest terms on the buy-to-let books, as the recapitalisation of the banks will only win back investor confidence once there is transparency on losses.
Maybe they think there is only so much bad news the market can take at any one time.
Dissatisfaction brewing among C&C investors
THERE IS much to admire about C&C’s performance in recent times. After some turbulent years, the Clonmel-based drinks group is almost debt free, while its Magners brand is once again in growth mode in the UK.
A strong first quarter allowed C&C to reiterate its operating profit guidance at its annual meeting yesterday, and just one shareholder was exercised enough to ask a question.
However, the re-election of all the board members highlighted some festering dissatisfaction among a cohort of investors.
Non-executive director Liam Fitzgerald had 11.4 million proxies cast against his re-election, while Richard Holroyd and John Horgan had roughly 10 million proxies cast against them.
Each of the trio had in excess of 210 million votes cast in their favour so they were comfortably re-elected. But their No votes were a multiple of those cast against the other board members. Even One51 boss Philip Lynch, who has been the subject of much negative media publicity in recent times, had only 661,000 proxies cast against his reappointment.
The reason? All three are on the audit committee and it seems some shareholders were not happy with KPMG’s remuneration.
The firm received audit fees of €400,000 and €600,000 for non-audit work, much of which related to the sale of C&C’s spirits and liqueurs division to William Grant.
It was a similar story in 2010. These sums were paid in spite of the audit committee having a stated policy of capping the non-audit fees paid to the auditor at a maximum of 100 per cent.
While the protest votes were not exactly of seismic proportions, it’s a signal that investors are becoming more exercised about corporate governance issues.
Today
Minister for Finance, Michael Noonan, is due before the Joint Committee on Finance, Public Expenditure and Reform, while ECB president Jean-Claude Trichet will address a European Parliament committee on economic and monetary affairs.
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