Cantillon

Inside the world of business

Banking federation miffed by lack of notice on report

IRISH BANKING Federation chief executive Pat Farrell had quite a dig at the Central Bank for not giving him notice of the survey showing that Irish banks were the second worst in the euro zone (ahead of Greece) on rejecting small business loan applications.

Asked about the survey conducted by two Central Bank economists, Farrell told RTÉ’s Morning Ireland that it was first reported in yesterday’s newspapers and had taken him by surprise. “I would have expected something more than a populist line from the Central Bank because, quite frankly, the way in which the report has been handled and its release falls fairly far below the professional standards you would expect from a body like the Central Bank,” he said.

This brought to mind the old Financial Services Consultative Industry Panel’s criticism of the regulator back during the lending frenzy of the property boom. The panel complained that it had not been given notice of increased bank capital charges for high loan-to-value mortgages.

Farrell was a member of the panel in 2006 when it said that it was “surprised” that there had been “no advance notice” of the revised risk weightings for mortgage lenders. (The measure proved too little and far too late to deflate the massive credit bubble.)

“The time allocated to the process was far too short with the press being made aware of the direction before individual firms were formally notified,” the panel noted in the minutes of a meeting it held in April 2006.

“It was agreed to write to the Financial Regulator to express the panel’s concern that this lack of notice to [the] industry was a retrogressive step and was to be regretted.”

Given the high cost of the Irish banks to the Irish public, it seems odd that a banking industry representative should still be sharply criticising a regulatory body for publishing independent data without consulting the banks first.

At the very least it shows that the cosy relationship between bankers and regulators is gone, and that is to be applauded.

Today

German chancellor Angela Merkel meets French president François Hollande in Berlin on the euro zone crisis

Placing Irish workers with Oz mines

AS GET-rich-quick schemes go, it has potential. Relocate to Queensland for four years; build a sales team of about six people; sell Irish people to Australian-based mining companies and watch the millions flood in. Easy? Jeff Bradtke and the team behind Workforce Solutions think so.

They are offering up to six sales positions for Irish people willing to move to Queensland and “sell” Irish tradespeople into mining companies.

We want to do for recruitment what McDonald’s did for food, he says, referring to the fast-food chain’s successful franchise model, which allowed it grow both rapidly and extensively. Bradtke is looking for people with strong sales ability and an entrepreneurial spirit to place potentially “thousands and thousands” of Irish workers with mining companies.

They will be paid a standard salary of Aus$50,000 dollars, as well as €10,000 for each placement, but will have to commit to at least four years to reap the awards as the commission will be paid out €50 a week over four years.

Workforce Solutions will also make a percentage of each placement, but Bradtke is very coy when it comes to revealing this.

As part of the model, sales people will also be encouraged to build up their own sales team, thereby increasing potential revenues, as they will get to keep half of everything their team makes, meaning that the sky could be the limit. By placing 500 candidates over four years, for example, a rep could stand to earn €5,000,000.

So is it too good to be true? Bradtke doesn’t think so. “Sometimes there are just great ideas,” he says.

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Quote of the day

High rejection rates in Ireland cannot be explained by the quality of the pool of potential borrowers.”

Central Bank report on bank lending to SME business in Ireland

Maybe Apple's market value is not quite the record it appears to be

SIXTEEN YEARS ago, Apple nearly filed for bankruptcy; this week, it passed a very different sort of milestone when it became the most highly valued public company ever.

The company was already the largest cap stock currently on the market, having passed Exxon Mobil. However, competitor Microsoft still held the record for the biggest market cap of all time, $616.34 billion, which it set in December 1999.

The traditional autumn speculation of product upgrades – in this case, the prospect of a new iPhone – helped Apple to surge past that mark to close at $665.15 on Monday, giving it a market value of $623.52 billion.

But is that a fair mark? The New York Times, quoting analyst Horace Dediu of Asymco, notes that Microsoft’s 1999 market value is still far higher than Apple’s when adjusted for inflation. The Microsoft of late 1999 would be worth $850 billion in today’s dollars, Dediu notes – compared to its current value of $258 billion.

According to the Times, Howard Silverblatt, an analyst at SP Dow Jones Indexes, calculates that Apple would need to close at $910 to beat the inflation-adjusted market value of its great rival.

The paper noted that Microsoft achieved its pinnacle back when high-flying technology and internet stocks had yet to be humbled by the bursting of the internet bubble.

Microsoft never regained the favour of investors after that happened, even as it delivered strong growth in revenue and profits. Investors have become increasingly concerned about the growth prospects of companies dependent on sales in the traditional computer business.

Apple, however, has seen great leaps in its value during the past four years, a period of great economic uncertainty.

One wonders if Dell chief executive Michael Dell has cause to reconsider comment he made back at Apple’s lowest moment in 1997, when he told a conference audience that if he was running Apple, he would “shut it down and give the money back to shareholders”.

As of this week, Apple’s stock market valuation is 30 times that of Dell’s struggling computer group.

In fact, you could add up the values of Microsoft, Intel and Google and still not come within $13 billion of Apple’s market cap.