Cantillon

Inside the world of business

Buyouts in banking should be encouraged

ARGUABLY THE most interesting line to come out of the case being taken by AIB to stop former AIB International Financial Services Staff poaching clients is that the bank feared a domino effect.

One way of looking at this is that AIB is concerned that it will not be able to turn down further management buyouts of its non-core subsidiaries in favour of trade sales. The reason being that the disappointed management will simply set up on their own taking – or trying to take – clients and valuable information with them.

The issue encapsulates one of the the dilemmas of state ownership of the banks quite nicely. At one level AIB is quite right to act to ensure that it obtains the best possible price for non-core assets. This is completely in tune with the objective of repairing the bank’s balance sheet which is a very important priority of its owner, the Government.

But viewed through the prism of fostering jobs and enterprise – which is in part at least is the perspective of the bank’s owner – such an approach may prove short sighted.

One of the best ways to salvage something from the wreckage of the Irish banking industry is to encourage the local management of the non-core subsidiaries to buy them. Some of these ventures may well fail, but others could go on to be the kernel of new viable business.

Many a slip twixt lunch and tea

WHAT LOOKED like another unprovoked attack of foot in month by the Minister for Transport at lunchtime was revealed as a carefully thought out – but ultimately botched – bit of spinning by tea.

The announcement by Leo Varadkar that the state would take €1 per share for its 25 per cent stake in Aer Lingus seemed at first like pointless union baiting. There is at best a small chance of finding a buyer at this price and the general consensus is that the Government is not serious about selling assets and ongoing rumblings to this effect are more about keeping the IMF/ECB/EU troika happy than any real intent on the Government’s part.

Then in mid-afternoon came the latest IMF staff report on Ireland. The message was pretty clear. Slowing global growth is going to hit Irish exports and with it our all-important debt dynamics. Lower interest rates on the loans being extended by the European Union will compensate, but in order to safely bridge the gap Dublin should look to raise €5 billion through asset sales rather than the €2 billion currently being discussed in a rather desultory fashion.

It might well have be a viable strategy to string the troika along about selling state assets when things were going relatively well and the figure being sought was €2 billion. Its another kettle of fish when our international pay masters want to see some progress and the target has shifted out to €5 billion.

Enter the Minister for Transport with what sounds like a positive move. But if he did so seemingly safe in the knowledge that he could count on Ryanair to muddy the waters, then he appears to have miscalculated.

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