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Fund industry could be Irish Stock Exchange's saviour

THE IRISH Stock Exchange has attracted much criticism over recent months, mainly as a result of the decision by a number of companies to de-list from the Iseq.

Yesterday, the exchange was in PR mode as it hosted a conference, “Irish Enterprise – Funding for Growth”, at the Convention Centre in Dublin.

ISE chief executive Deirdre Somers made a valid point when she said Ireland had a dearth of companies scaling up to flotation. She argued that the ISE’s competition is not so much from other bourses, but from trade buyers, with too many companies opting for trade sales at an early stage, when it may not necessarily be their best option.

Paddy Power chief executive Patrick Kennedy also spoke out in favour of the exchange, where Paddy Power is one of the heavy hitters.

While the stock exchange is keen to stress its credentials as a serious and relevant bourse for equity investors, it should not shy away from its status as a centre for the listing of investment funds and specialist debt instruments. These now account for the bulk of the exchange’s revenues.

Coincidentally, yesterday saw the Central Bank’s head of markets supervision, Gareth Murphy, address a conference on the EU prospectus directive, in London.

The Central Bank took over the management of prospectus documents for equity, debt and closed-ended funds from the Irish Stock Exchange a little under a year ago, in line with EU rules.

While welcoming the role of prospectus documents in providing investor protection and greater transparency, he said the lack of case law suggests that the probability of successful prosecution of issuers under the prospectus documents may be too low.

Murphy’s address also highlighted the tricky balance between implementing regulation and excessive red-tape that confronts the Irish Central Bank as it serves to oversee the operation of Ireland’s fund industry.

Nonetheless, Murphy’s appearance in London serves as a reminder that Ireland, despite its economic difficulties, is still a serious player in the global fund industry. As he pointed out yesterday, Ireland is the second largest jurisdiction for issuers in Europe.

This is something that Ireland Inc should be promoting as it tries to distance itself from previous accusations of “wild west” behaviour at the IFSC. As an institution that plays a central role in Ireland’s securities industry, the Irish Stock Exchange should also serve to highlight the role it plays in Ireland’s funds landscape.

Today

Governor of the Central Bank Patrick Honohan is to speak at the Corporate Restructuring Summit in the Convention Centre, Dublin.

EU realities were destined to bite back at strong rally in Irish bonds

THE RISE in Irish bond yields yesterday could have been worse and perhaps it will be. The strong rally in Irish bonds since the June 29th EU leaders’ summit was inevitably going to be tempered by the realities of EU politics and the two steps forward, one step back approach that has defined efforts to stem the debt crisis.

What is interesting is that when it came it took so many people by surprise. The Government was adamant yesterday that it did not know what the Germans and their AAA peers were cooking up, and nor were they consulted.

It is not as implausible as it seems because the issue that preoccupies the AAA countries is of course Spain, which is inching its way to a bailout.

A significant step in that direction will come tomorrow when the results of the stress tests of the Spanish banks are unveiled. If the Irish experience is any guide, losses way in excess of the Spanish government’s worst nightmare will emerge.

But unlike the Irish situation it might actually suit the Spanish who, if it comes to it, are determined to avoid a sovereign bailout.

One interpretation that can be put on the statement issued by Germany, Finland and Netherlands is that it’s a warning shot to the Spanish not to kitchen-sink the bank bailout via the ESM in order to avoid a full-blown sovereign bailout, if that is what is actually required.

The alternative – that Germany is engaged in some sort of row-back on previous commitments – does not ring true given the nature of the concessions regarding the role of the ECB the Germans have agreed to, albeit reluctantly.

Let’s hope so anyway.

RBS mess ‘in line with’ other banks 

THE MESS that is the Irish banking system was starkly illustrated in a recent investor presentation by RBS chief executive Stephen Hester.

When it came to Ulster Bank the best he seems to have been able to manage was to point out that it was “appropriately provisioned in line with its peers”.

This translates as “we have lost out shirts, but probably by not much more than AIB and Bank of Ireland”.

The priority, he said, was to “expand management actions” in three areas: “revenue initiatives in low-rate environment, costs reduction and problem loan management”.

It’s not much to shout about and highlights how big a hole the bank has dug for itself here. But if Hester’s presentation is any guide the bank is settling in for the long haul back to profitability.

The extent of this task was also highlighted yesterday by reports that the bank was putting a portfolio of 640 apartments and a hotel on the block for €75 million.

The bank is hoping to capitalise on demand from private equity and the like for portfolios of rentable Irish properties that will in turn allow them to capitalise on the strong rental market. And what is underpinning that market? The reluctance or unwillingness of Ulster Bank and its peers to lend money to people to buy their own homes.

Quote of the day

Kevin is exactly the right leader for DAA

– Dublin Airport Authority chairman Pádraig Ó Ríordáin commenting on the appointment as chief executive of Kevin Toland

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