Cantillon

Inside The World Of Business

Nama should shorten paper trail for small-time developers

IT IS not entirely surprising that a number of banks transferring loans to the National Asset Management Agency (Nama) are unhappy with the vast paperwork being demanded by the agency.

April marks the first birthday of the Government’s unveiling of the Nama plan and the top 10 borrowers (out of 1,500 to be transferred) have not yet moved over.

The first deadline for the top 10 transfers at the end of last year – as set out in Nama’s draft business plan published in October – was missed. So, too, was another on February 12th. Another falls on February 26th, but Minister for Finance Brian Lenihan has said that it could be the end of March before the loans are transferred.

The difficulty is Nama has set the bar high on the information sought on each loan. This is no bad thing for the borrowers with the largest exposures, which include developers Liam Carroll, Bernard McNamara and Seán Mulryan.

Lands have had to be valued by both the banks and independently for Nama, legal title checked and vital loan paperwork assessed.

Given that the loans are for €80 billion and the upfront cost to the State is €54 billion, Nama’s initial work is the most important.

The scale of the paperwork is vast. One of the top 10 developers is known to have 50 loan facilities with one bank. The questionnaire set by London-based bank HSBC, Nama’s adviser, poses 337 queries requiring about 1,250 pieces of data to be provided. This means the bank must provide more than 60,000 lines of data for one developer and that covers his dealings with just one bank.

However, should the loans of a small-time Co Mayo developer face the same rigour as those of McNamara and Carroll? Hardly. Changing the information requirements would speed up the process. It has taken almost 11 months to deal with the top 10. How long will it take all 1,500 borrowers? It is easy to understand why the banks want Nama to reduce the amount of information sought for the next waves of loan transfers. It might help ease the bottleneck.

Stan the satisfied man

The chief executive of Kerry Group, Stan McCarthy, can be forgiven the air of quiet satisfaction that permeated his comments on foot of the very good set of figures last Tuesday.

As Ireland rediscovers the true origins of its economic success, it is coming back to Kerry and the other big food companies. It is some comfort then to find the largest and most global of them in such fine fettle given the specific difficulties its faces in both the Irish and UK markets as well as the general economic climate.

What seems to have pleased the markets most is the 80-basis-point improvement in margins, which house broker Davy claims is a consequence of the successful reorganisation of the business rather than favourable movements in prices and costs. In essence it was good management rather than just dumb luck.

McCarthy and his management team can take the credit for that and also the picture that emerges of a company that is well managed, confident and clearly still ambitious. These are not adjectives that are commonly associated with the banking sector that dominated the business environment here for much of the last decade.

Not doubt more attention will and should be paid to the back story of Kerry and its peers as Ireland struggles to return to export-led growth. And in that regard McCarthy’s comments to the effect that the transformational decision taken 20 years ago by Kerry to go abroad to seek business came about because of the company’s own ambition and not some Government programme or initiative are surely pertinent.

Not easy, not being evil

In the days when Google was run by highly talented but somewhat idealistic Silicon Valley engineers, it came up with the motto “Don’t be evil”.

Professional managers run the show now but the phrase still appears on its investor-relations website where the company says the phrase means “following the law, acting honourably and treating each other with respect”.

Events in Europe yesterday will have no doubt sent shock waves back to Google HQ in California then. An Italian court found three of its executives guilty of privacy violations over the hosting of a video showing bullying of a disabled boy.

In Brussels the European Commission’s antitrust watchdog said it was carrying out a preliminary investigation of Google.

The search engine seems particularly aggrieved that some of the complainants are linked to Microsoft. This is of course par for the course.

The antitrust investigation into Microsoft, which resulted in a €899 million fine from the commission, was sparked by a complaint from its rival Sun Microsystems; a similar inquiry into Intel, which saw the chip giant fined €1.06 billion last year, kicked in after lobbying from the smaller player in the market, AMD.

Although Joaquín Almunia’s office is keen to stress a formal investigation has not yet begun, it seems Google has joined the exclusive club of US tech firms that have attracted the attention of the EU’s competition watchdog. Whether this proceeds to a full-blown case will be closely watched on both sides of the Atlantic.

Google clearly takes privacy seriously but it’s increasingly becoming clear that “don’t be evil” is not always easy to reconcile with running a global corporation.

Today

The Oireachtas Joint Committee on Finance and the Public Service will hear from banking experts Klaus Regling and Max Watson, who have been appointed by the Government to conduct a preliminary enquiry into the banking crisis. Meanwhile, RBS, the owner of Ulster Bank, will report full-year figures, which are expected to show the largest ever loss by a European bank.

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