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Archive for the ‘Irish economy’ Category

Table of the Week

EurostatGDP 

This week, the European statistics agency, Eurostat published the latest GDP data for the EU and selected non-EU countries. Nine of the 27 EU countries are clearly in recession with two successive quarters of negative GDP growth, but as we know on here, Ireland too is in recession because although its change in Q4,2012 was officially logged as 0.0% or -0.0%, it is actually -0.047% which confirms a second quarter of GDP contraction.

Salaries of the Week

HowMuchCompetitionAuthority

This was the week that we learned the last accounts for the Irish Film Classification Office were for 2009 and that subsequent accounts hadn’t been filed “due to an oversight”. We learned this week that the latest accounts filed for Ireland’s woeful Competition Authority were for 2010 and are available here. No word on subsequent years. We learned that the average salary for the 46 staff in the Competition Authority, comprising four board members, 38 staff and four secondments from other Government departments was an impressive €68,600 in 2010. Furthermore, the relatively small operation ran up unspecified – no, not building or travel or printing or advertising – administration costs of €139,000 and IT costs of €104,000. Overall, the operation cost us €4.4m in 2010. Its outputs are less impressive, it certainly deals with notifiable mergers but I cannot see evidence of robustly rejecting a merger, ever. There are a tiny number of prosecutions for competition infringements, and yet, we continue to live in a State where medicines are several times more expensive than in the neighbouring jurisdiction, our lawyers are still the second most expensive in Europe after Moscow, our recession-racked economy still tolerates €500-1,000 per hour payments to professions. And don’t even get me started on consumer goods, from groceries to mobile phones.

Quote of the Week

“It really does make me ashamed of my government when they can get wages in the hundreds of thousands annually, but when one of the most important children’s wards in Ireland, for some of the sickest kids in Ireland, has to rely on charitable donations to buy a bucket of paint and a brush. That is one of the sickest things I have ever come across in my short lifetime here” 16-year old Kerry man Donal Walsh who lost his fight with cancer last weekend – in his own words he wrote about dealing with cancer, they’re worth a read here and here.

Rubbish of the Week

A month ago, amid widespread illegal dumping in the Gardiner Street area of Dublin, Dublin City Council was threatening not to collect rubbish from certain areas of the city and let the residents resolve the problem of illegal dumping themselves; how, wasn’t clear but it had hints of a call for vigilantism but in the end, DCC abandoned that hare-brained scheme but have now introduced another – over a week ago, they confirmed they were writing to local authority tenants demanding proof that they had paid for a waste disposal provider. And it seems DCC is even proposing to extend this new scheme to allow its officials knock on anyone’s door to demand proof of having engaged a provider.

Curse of Dragons Den of the Week

DBImageTwitter

The “curse of Hello” where full colour splashes of celebrity lives in the pages of Hello magazine, only to be soon followed by banana skins, revelations of peccadillos and tragedy, seems to have spread to the Dragons Den, the Japanese TV format created which was picked up by the BBC and latterly by RTE. In Ireland, we have seen Dragons Bill Cullen’s motor dealership and hotel operation fall from grace, and more recently Niall O’Farrell’s chain of formal wear and suit hire shops fall victim to the ongoing recession. In the UK this week, the Daily Mail suggested that one of the stars of the UK version of the show, Duncan Bannatyne was facing money troubles, though the scrappy Scotsman was quick to tweet that the Daily Mail story was untrue.

Table of the Week

OpennessIndex

This week, the NTMA produced its monthly “Ireland has turned the corner” presentation to investors with its laughable spin on an economy still in recession, with 14% unemployment, with retail sales declining (fast), with commercial property rents and capital values declining, with residential property declining, the NTMA still manages to appear positive. Its openness proxy is a good one – this adds together exports (X) plus imports (M) and divides the sum by GDP. In Ireland’s case, we are amazing compared to the other PIIGS, but this ignores the massive in/out flows from multinationals which is a unique feature of the Irish FDI-focussed economy. Anyway, good to know residential property rose for the first time since 2007…..

Old Media swan song of the Week

“Sarah McInerney of The Sunday Times acknowledged that the online version of that newspaper’s Irish edition which she said was known within the company as the “regional edition”, was “not doing well”.” So reported the Irish Times this week

We also had UTV’s management statement for Q1,2013 which noted that its commercial radio operations in Ireland (north and south) were down 8% in Q1,2013 compared to a year previously. That’s a worrying decline for a company that is well regarded commercially but more worrying was the statement “We believe  that we continue to outperform the market” which doesn’t bode well for competitors here, particularly RTE and Communicorp (Newstalk and Talk amongst others) and Landmark Enterpises (the Crosbie vehicle that has taken on the operation of local radio interests previously managed by TCH).

We also had Johnston Press’s management statement for Q1,2013 – you might ask where are the statements for Irish-owned companies but apart from IN&M indicating revenues were down 10% this year on last, we haven’t heard a mig from our own. Johnston Press publishes 12 local titles in Ireland – Donegal Democrat, Donegal People’s Press, Dundalk Democrat, Leinster Leader, Leinster Express, Leitrim Observer, Longford Leader, Kilkenny People, Limerick Leader,  The Nationalist and Munster Advertiser, Tipperary Star and The Echo in Tallaght. Although total revenues were down 11.4% in Q1,2013 from a year previously, it seems the decline is concentrated on advertising and that circulation revenue had held up.

Resemblance of the Week

ItsUncanny

Colourful Independent TD for Roscommon, Luke “Ming” Flanagan turned up at the Dail this week, a-la-Paris Hilton, with a tiny dog in tow. Julie, which could be a Scottish Terrier but could be some lovable Roscommon-Leitrim mongrel. Perhaps one of these days, the old media might run a feature of politicians and their dogs to judge if owners indeed chose dogs in their own reflection.

Parliamentary insult of the Week

SamuelJacksonImpression

“In truth I have to say that I am fed up to the back teeth with the foot dragging, the whinging, the stalling; sometimes, you might even say the attempt to politically posture on critical issues such as this; the begrudging, the bellyaching that you hear, the conditioning before statements can go out from colleagues. And I’m depressed listening to a tribe of Jeremiahs that infest the political process  and whose first thought is to attack any genuine attempt that is made for positive proposals. And those people of course have nothing to contribute themselves. And I also have to say that I get glum at the whited sepulchers who pontificate to us about a shared society and talk to us about harmony and consensus politics and yet, unless they are taking the lead themselves and are taking everything they want, they strain and stretch every sinew to abstain and obstruct what is going on. And quite honestly Mr Speaker, I think we have reached the stage that if we wait for the last person to board the train, the train will never leave the station“ Peter Robinson, First Minister of Northern Ireland, in the Stormont Assembly responding to criticism of the joint Sinn Fein/DUP “Together: Building a United Community

Let’s hope Peter’s grasp of the political challenges facing Northern Ireland is better than his grasp of the Good Book. The prophet Jeremiah may well have forecast doom-and-gloom but as it turned out, his predictions were accurate. And a day or two later, the TUV picked up on this when they issued a statement

“Yesterday the co-First Minister branded his critics in the Assembly “a tribe of Jeremiahs”. The image struck me as an exceptionally odd form of insult, particularly as the warnings proffered by Jeremiah proved to be accurate. Given the traffic chaos which is developing at the Maze it is obvious that the warnings of some Jeremiahs have been well founded.”

Tax Home Truth of the Week

“The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing” Jean-Baptiste Colbert, finance minister under Louis XIV in 17th century

Okay, it’s not new but the general absence of hissing over the property tax – yes, there have been a few marches, a handful of occupations but the indications from the Revenue Commissioners is that the tax has been accepted far more widely than its predecessor, the household charge. This time around, the Government has firmly passed responsibility for the tax to the still-generally-feared Revenue Commissioners, it has a 50% discount in place for 2013 and despite it being a deeply unfair tax in many respects, it seems as if it is on track to be accepted by a considerable majority by the filing deadline – 28th May 2013.

Act of Transparency of the Week

In Uganda, a country with a land area three times that of Ireland, and a country to which we provide foreign aid, this week, they achieved a fully computerized Land Registry showing who owns what.  Amazing. In Ireland, we haven’t quite registered all property yet, and there is a sizable amount, particularly in south county Dublin, apparently, that has yet to make it online. So, you just have to wander up to the dusty Public Records Office on Constitution Hill in Dublin and pay your €15 for a photocopy.

Whitewash of the Week

NotCorruptUntilBlueInTheFace

The vehement disdain towards the “anonymous author” that blew the whistle on Garda malpractice in quashing traffic penalty points, was not well disguised. Nor was the anonymous author whom we’ve all known for some time was John Wilson. The report itself is here and there is a lengthy additional report on what the Garda practices are. Heads are still being scratched at how seven separate notices being quashed for the same family didn’t rise to the level of corruption. But mostly we wanted to know why the Gardai were investigating themselves when we have a perfectly good Garda Ombudsman set up for such investigations. Three Gardai face disciplinary action, the report will now be examined by the Oireachtas justice committee but the Garda Commissioner and Minister for Justice Alan Shatter are desperate to draw a line under the whole affair and calls by Transparency International for better protection of whistleblowers seem to have fallen on (the) deaf ears in Officialdom.

Response to debt demand of the Week

VewyVewySorry

And finally, Clare Dooley whose Twitter profile says she assists people suffering in the economic downturn provides a novel approach to demand letters from the banks.

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This afternoon in Dublin’s High Court, Mr Justice Iarflaith O’Neill ruled in favour of the colourful Johnny Ronan’s landlord company in a case against the tenant, the Irish Medical Council. Johnny’s company, Tanat Limited, co-owned with Kildare developer Peter Conlan had claimed that a lease on a property,  Kingram House  off Fitzwilliam Square pre-dated February 2010 when Upward Only Rent Review clauses were outlawed. Although the lease was technically entered into after February 2010, the judge today ruled that a series of exchanges in 2008 were sufficient to establish the existence of a lease then.

So great news for Johnny who will see the rent maintained at €820,000 even though the evidence shows the current market rent for Kingram House today would be €374,100.

The judgment from today is not yet online.

Elsewhere the Court Service indicates that there has not yet been any appeal by Johnny’s company Ickendel against a High Court ruling which saw Bewleys Oriental Cafe win the right to a current market rent rather than the 2007 rent which had been imposed on it. NAMA might have been called on to fund the appeal, and it might be the Agency decides to let this litigation pass. Last year. Johnny lost control over many of his prized assets when NAMA had receivers appointed to Treasury Holdings companies and subsequent attempts by Johnny to have the receivership overturned were unsuccessful. And more recently the Treasury Opera CMBS is ending up in the hands of investors who bought underlying loan rights.

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“These are challenging times for the whole banking sector in Ireland, not just for the domestic banks. KBC Ireland is an important provider of credit to the Irish housing market and as the Deputy rightly points out the Bank has extended some €14 billion of credit to the Irish economy.” Minister for Finance Michael Noonan on 23rd April, 2013

This morning KBC Ireland, one of the few non state-owned retail banks operating in Ireland, released its management statement for the first three months of 2013. There is a separate presentation to analysts here and Ireland is detailed on pages 62-64. Here’s what we learn:

(1) Loss after tax and impairment provision of €77m in Q1,2013 compared with €148m in Q1,2012

(2) Mortgages in arrears have risen from 17.5% of the principal residential loanbook at the end of 2012 to 18.1% today.

(3) Mortgages in arrears have risen from 29.2% of the buy to let loanbook at the end of 2012 to 30.6% today.

(4) Impairment charges of €300-400m are expected in 2013, compared with €547m in 2012 and €525m in 2011. Impairmentr in Q1,2013 were €99m compared with €195m in Q1,2012 and €87m in Q4,2012.

(5) Retail deposits rose by €0.3bn in Q1,2013 – including from 5,000 new accounts – bringing the overall total of deposits to €2.7bn

(6) Post-provision loans are €14.0bn down from €14.3bn in 2012 compared to €15.7bn in 2011. [UPDATE 17th May 2013. The KBC presentation didn’t show the post-provision loans, just the par value, the % non-performing, and the % of non-performing taken as a provision. I have worked out the detailed after provision value below which is €13.98bn, which is €345m down from the €14.325. When you deduct the €99m increased provision for losses in Q1,2013, the net reduction in lending is €246m.

The view on here is KBC faces colossal challenges, and with an injection of Belgian blood onto the Irish board this year and after a cumulative €1.055bn bailout from the Belgians, you would wonder how long KBC is to operate here.

Minister Noonan might note that KBC is providing €14bn of net after impairment credit to the Irish economy, but the trend is obvious with deposits growing strongly attracted by high deposit interest rates, loans being reduced and corporate funding from the Belgian parent being reduced. Will a point arrive when KBC cuts its losses.

KBC sucked [UPDATE 17th May 2013] €0.546bn out of the Irish economy in Q1,2013, comprising an increase in deposits of €0.3bn and a net reduction in loans of €0.246bn. That compares with €2.3bn sucked out in 2012. KBC is steadily reducing its parent company exposure to Ireland, thanks to redeeming loans and attracting more deposits. It is a bank to watch closely.

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BrianMcEnery

If you were asked to name the NAMA board, you’d probably struggle beyond Brendan McDonagh the CEO, Frank Daly the chairman and John Mulcahy the head of asset management. But there’s a former IMF mission chief there also, Steven Seeling, not to mention a former county manager William Soffe, former KPMGer Eilish Finan and the board’s most recent appointment Oliver Elingham who got the call from Minister for Finance Michael Noonan last month.

And then there is Brian McEnery, an accountant who is a partner in accountants and receivers Horwath Barstow Charleton in Limerick. Brian was appointed in December 2009 , a full 13 months before General Election 2011 where Brian was director of elections for Limerick-man Michael Noonan who is now of course the most important minister in this administration. Brian’s is chair of NAMA’s audit committee and his term on the NAMA board is set to expire in December 2013.

Last week, Minister for Health James Reilly announced that Brian has been appointed chairman of the Health Information and Quality Authority, HIQA – the organization that monitors standards of health care.

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The former CEO of the NTMA and now Government-nominee to the board of AIB, Michael Somers made headlines a fortnight ago when he claimed that increased regulation was leading to international banks to hand back their licenses and exit from Ireland, taking their business and contribution to the economy with them. The comments were interpreted by a cartoonist in one newspaper with a helicopter emblazoned with “Goldman Sachs” taking off from the IFSC building beside Bus Aras bus station, with the Famine memorial in the foreground and some choice words about bankers and their pay, which was also cited by Michael as a reason for deterring recruitment and activity in state-owned banks.

But is there any truth to the claim?

This week in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Finance Michael Noonan to give detail on the number of banking licenses that had been given back. In terms of wholesale banking operations of the type we would associate solely with the IFSC, the number has declined from 30 in 2010 to 22 today, a decline of 8 or 27%.

Alas, Michael Somers didn’t provide detail on the regulation which IFSC banks found unpalatable, and there might be other reasons for the exodus, but it seems undeniable that there has been a steady decline in wholesale banks since 2010.

The parliamentary question and response are here:

Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm by year for each of end of 2010, end of 2011, end of 2012 and currently, the number of extant banking licenses issued to banks operating in the International Financial Services Centre; and if he will make a statement on the matter.

Minister for Finance, Michael Noonan: The total number of credit institutions registered in Ireland is 437. A full list of authorised credit institutions is available on the Central Bank website at http://registers.centralbank.ie/DownloadsPage.aspx.

It is difficult to clearly demarcate which banks participate in international financial services activity based solely on location in the International Financial Services Centre. The Central Bank has identified the key international financing operations which it considers to be IFSC type banking activities i.e. wholesale institutions carrying out non-retail banking activity. The number of wholesale institutions licensed for non-retail banking activities on 31 December 2010 was 30; on 31 December 2011 there were 26; and on 31 December 2012 there were 24. The current number of wholesale institutions licensed for non-retail banking activities is 22.

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Take Paddy McKillen, pictured below right.

DrownedAndSaved

In 2010 and 2011, he fought tooth-and-nail in Dublin’s High Court and Supreme Court to stop NAMA acquiring his loans. In the end, the Supreme Court judges decided that NAMA could acquire Paddy’s loans but would have to consult with him beforehand. Despite swearing blind at the High Court that Paddy’s loans were “systemic”, NAMA abandoned the fight and decided not to acquire Paddy’s loans which remained at IBRC and Bank of Ireland.

Lucky for Paddy.

Because right now, Paddy has been given a window to refinance his IBRC loans – estimated to be €300m of personal loans and €550m of corporate loans. To refinance his loans, Paddy must repay them 100% and Paddy has been having a whinge through the press recently that IBRC is not accepting his most generous offers which are almost equal to what Paddy owes. Paddy’s window to refinance at 100% expires soon; originally, the liquidator at IBRC was going to have the loans valued by the end of May 2013 and they would then be offered to the market, unless they had been refinanced at 100%. That valuation of the IBRC loans by USB and PwC due at the end of May, seems to have slipped but regardless, it will be a matter of weeks when the un-refinanced loans are offered to the market.

Why is Paddy lucky? Because, even after his refinancing window closes, he will be able to bid for his own loans, and if his bid is the highest and if the bid is in excess of the independent valuation, then Paddy will be able to acquire his loans at a discount. So IBRC into which we have shoveled €34bn will be selling its loans to the market, and if the borrower is the highest bidder for those loans then the loans will be sold to the buyer at a discount, or in other words, the borrowers will receive debt forgiveness or a debt writedown.

To illustrate, if Paddy has personal loans of €300m today, he can refinance these today at 100%, that is pay IBRC €300m and any outstanding interest and fees. After the refinancing window closes, then IBRC will offer Paddy’s loans to the market and say the highest bid is €200m and this is in excess of the market value of the loans, then they will be sold to that bidder regardless of who that bidder is. If it’s Paddy, then he gets €100m of debt forgiveness, no questions asked.

Contrast that with NAMA which is prevented by the NAMA Act from selling assets back to debtors below their par values. So, if a NAMA debtor owes NAMA €300m and offers NAMA €200m for them, and if NAMA markets the loans and €200m remains the highest bid, then NAMA can NOT sell the loans to the NAMA debtor. Which brings us to Sean Reilly (pictured top above, left) who happens to owe NAMA about €300m according to press reporting. Sean is prevented by the NAMA Act from having an interest in buying these loans. The best Sean can do is show some leg to potential investors and try to get them interested in bidding for the loans, and the best Sean can hope for is to act as a consultant after the loans have been sold to someone else.

Minister for Finance Michael Noonan is clueless about all of this, he doesn’t know how much the NAMA proscription is costing NAMA and by extension the State. He also doesn’t know why there is one rule for IBRC disposals and another entirely for NAMA’s.

What an eejit, and given he is being advised by the Department of Finance on these policies, what a bunch of eejits are employed there.

The Minister was responding to a parliamentary question from the Sinn Fein finance spokesperson Pearse Doherty. The response must count amongst the most nonsensical you’re ever likely to see.

Deputy Pearse Doherty: To ask the Minister for Finance the reason the Irish Bank Resolution Corporation borrowers will be eligible to buy their own loans at less than par value when such loans over €10m are offered to the market imminently, but that borrowers at the National Asset Management Agency are precluded by the NAMA Act from buying their own loans at below par value..

Minister for Finance, Michael Noonan: As previously advised, independent third parties are being engaged to independently value the loan assets of IBRC (in Special Liquidation). There is an obligation on the Special Liquidators to ensure that assets of IBRC are sold at a price that is equal to or in excess of the independent valuations that are being obtained. A process is currently being finalised that ensures that maximum value is extracted from the loan sales. The Special Liquidators are responsible for putting in place a liquidation process which fulfils their obligation under the IBRC Act and where applicable the Companies Acts.  It is a matter for the Special Liquidators to determine what bidders constitute qualifying bidders for the purposes of the sales process.

The protocol which is in place for the disposal of the IBRC assets is guided in a specified manner as the Special Liquidator will only be holding the assets for a limited period of time. Any assets that are not sold to third parties for a value higher than the independent valuations will be sold to NAMA at that price. Assets that are transferred to NAMA will then be subject to the protocol according to the NAMA Act 2009.

It is the objective of NAMA in any loan sale to achieve its commercial mandate of obtaining the best financial return on behalf of the State. In accordance with the NAMA Act procedures have been put in place by the Agency to achieve these objectives.

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“It’s hard to make a man understand something when his livelihood depends on him not understanding it” Upton Sinclair

DBRS

How do ratings agencies make money? It may come as a surprise to some of you that ratings agencies get paid by companies to rate their debt and prospects. Which inevitably places ratings agencies in conflict between their desire to be retained to provide an assessment on one hand, and on the other the need to provide independent credible assessments to the market. But that’s how the business works, and the world’s biggest ratings agencies show no sign of withering away, despite the opprobrium heaped on them after failing to identify looming crises in American sub-prime mortgage lending and European bank debt.

The three main ratings agencies will be familiar to most of you – Standard and Poor’s, Moody’s and Fitch. A fourth ratings agency, Dominion Bond Rating Service (DBRS) might not be a household name but it seems to get disproportionate reference by the NTMA when pointing to how healthy our prospects are. DBRS recently produced an assessment of NAMA, covered here. Whilst it undoubtedly contained useful and factual information, for example the three year accounts analysis, its opinions on NAMA were eyebrow raising in their positivity.

DBRS said of NAMA that it has assembled a “talented team” with “deep experience” and with “the necessary skills to extract the best possible return from the loans and underlying property assets”. DBRS went on to say “NAMA has developed a robust and efficient infrastructure that allows NAMA the flexibility to develop individual responses to each debtor that bests maximizes the returns “

We find out today that although NAMA picks up some of the costs of the ratings agencies generally who rate NAMA’s bonds, that NAMA itself directly pays only one of the ratings agencies and guess which one? Yes, it’s DBRS! How much does NAMA pay them for their handsome compliments? Alas, that is confidential.

The information was revealed in the parliamentary question and response below:

Deputy Pearse Doherty: To ask the Minister for Finance if he will confirm the sums paid by the National Asset Management Agency to each of the ratings agencies Fitch, Moody’s, Standard and Poor’s and Dominion Bond Rating Service in each of 2010, 2011, 2012 and to date in 2013..

Minister for Finance, Michael Noonan: Rating agency costs relating to NAMA are, in the main, paid by the NTMA as part of its overall sovereign rating programme.  NAMA directly bears the cost arising from the rating of NAMA Bonds by Dominion Bond Rating Service (DBRS).  NAMA advises that the terms of its agreement with DBRS are commercially sensitive and of a confidential nature.

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