Archive for November 1st, 2012

Yesterday, the Central Bank of Ireland (CBI) released its monthly snapshot of the state of Irish banks focussing on deposits and lending. The data covers the period up to 28th September 2012 and shows that during the month of September 2012, deposits by ordinary households and businesses decreased slightly at the so-called “covered” or State-supported banks – essentially the two pillar banks, Bank of Ireland and AIB, and also Permanent TSB. The decrease of €0.2bn from €104.8bn in August 2012 to €104.6bn in September 2012 continues a trend of general stabilising private sector deposits at the covered banks, and over the past year such deposits have increased by €2.6bn. Deposits are now back at May/June 2011 levels though are still €20bn lower than in October 2010 on the eve of the IMF/EU bailout. The CBI monthly commentary doesn’t appear to be available yet.

The CBI doesn’t provide an analysis of private sector deposits at the covered banks – about the only analysis it doesn’t provide – but in terms of all banks operating in Ireland including foreign and IFSC banks, Irish household deposits rose by €373m in September, which brings such deposits to €92.6bn. Total deposits from all sources in all Irish banks rose by €1.2bn in September with a €6bn increase in deposits from the Euro area offsetting declines elsewehere.

The Department of Finance on 18th October published its “Deposits Trends” series for September 2012 which showed deposits at the Covered Banks fell by €0.8bn (-0.5%) month-on-month to €153.3bn. This still represents an increase of €13.0bn since reaching a low-point of c. €140bn in July 2011. This demonstrates depositor confidence in the strength of the banking system following its successful recapitalisation last year” These deposits include deposits at overseas branches, in particular at the Bank of Ireland/British Post Office, so they are of limited use, but the trend indicates positive news. The Department says the decline in September is attributable to “business as usual outflows”

Here is the full set of deposit statistics for the different categories of bank operating in Ireland.

First up is the consolidated picture for all banks operating in Ireland including those 450-banks based in the IFSC which do not service the domestic economy.

Next up are the 20 banks which do service the domestic economy and include local subsidiaries of foreign banks like Danske, KBC and Rabobank. There is a list of all banks operating in Ireland here together with a note of the 20 that service the domestic economy.

And lastly the six State-guaranteed or “covered” financial institutions (AIB, Anglo, Bank of Ireland, EBS, Irish Life and Permanent and INBS – Anglo and INBS have now been merged to form the Irish Banking Resolution Corporation, IBRC)

(1) Monetary Financial Institutions (MFIs) refers to credit institutions, as defined in Community Law, money market funds, and other resident financial institutions whose business is to receive deposits and/or close substitutes for deposits from entities other than MFIs, and, for their own account (at least in economic terms), to grant credits and/or to make investments in securities. Since January 2009, credit institutions include Credit Unions as regulated by the Registrar of Credit Unions. Under ESA 95, the Eurosystem (including the Central Bank of Ireland) and other non-euro area national central banks are included in the MFI institutional sector. In the tables presented here, however, central banks are not included in the loans and deposits series with respect to MFI counterparties.

(2) NR Euro are Non-Resident European depositors

(3) NR Row are Non-Resident Rest of World depositors (ie outside Europe)



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“Following a request for proposals issued earlier this year, the National Asset Management Agency (NAMA) has today published a Contract Award Notice for the provision of investment management services to a Qualifying Investor Fund (QIF).

This Contract Award Notice does not constitute a contract award on behalf of the National Asset Management Agency (NAMA) or a contracting authority.” NAMA statement 1st November 2012

Well, the closing date for receipt of tenders for investment managers for NAMA’s so-called Qualifying Investor Funds or QIFs was 6th March 2012 and it is only today that NAMA has awarded the contract to Mercer Global Investments Europe Limited, or rather instead of awarding the contract, NAMA has undertaken to recommend the appointment of Mercer to the board of the QIF. Confused?

The background is this – despite all the interest in NAMA property which NAMA keeps on harping about, NAMA wants to create a separate vehicle which will buy property from NAMA and manage it. QIFs allow rich individuals and companies to pool their money and buy larger properties and NAMA figures, despite ALL the international investors beating its doors down to buy its property, that establishing such investment funds will lead to a better return for the Agency. NAMA might be right in its strategy but it is telling that it is NAMA establishing the QIF and not some third party.

NAMA announced it was creating QIFs in January 2012. It is not clear why there has been such a delay in progressing the initiative, but the regular audience on here will recall it took NAMA a year after it was first announced, to launch its deferred mortgage initiative. The fact it has taken eight months for NAMA to appoint a manager doesn’t really inspire confidence in either the Agency or its support for QIFs. NAMA has yet to appoint a custodian and administrator for its QIFs, the closing date for tenders was again eight months ago on 15th March 2012.

It seems that now NAMA will create a QIF regulated by the Central Bank of Ireland and will then appoint a QIF board, though it hasn’t explained how, and when the board is created, NAMA will recommend the appointment of Mercer as an investment manager. The QIF will then buy assets from NAMA or its receivers or developers but not before getting an uptodate valuation and undertaking due diligence, and then Mercer will manage the asset. Politicians who expressed concerns earlier this year that NAMA was creating Mini-me incarnations of itself were fobbed off with vague assurances that this was not the case.

Mercer Global Investments Europe Limited is an Irish company incorporated in 2006 and is owned by the Mercer group. Its directors are Tom Brennan (50), Paul O’Faherty (55) and Michael Dempsey (36).

On a related theme, it is a shame that Minister Noonan has failed in the past 20 months to deliver on his promise to introduce Real Estate Investment Trusts to Ireland which might have citizens of more modest means to invest in property if they so desired, in a simple tax-efficient manner.

The Sinn Fein finance spokesperson Pearse Doherty asked Minister Noonan about NAMA’s progress with QIFs and the Department of Finance’s progress with REITs on 25th September, 2012. The full parliamentary questions and responses are here.

Deputy Pearse Doherty: To ask the Minister for Finance when the National Asset Management Agency expects to make an appointment for the provision of investment management services for its proposed qualified investments funds, the tender for which was issued on 25 January 2012 with a closing date for bids of 6 March 2012.

Deputy Pearse Doherty: To ask the Minister for Finance when the National Asset Management Agency expects to make an appointment for the provision of custodian and fund administration services for its proposed qualified investments funds, the tender for which was issued on 3 February, 2012 with a closing date for bids of 15 March 2012..

Deputy Pearse Doherty: To ask the Minister for Finance when the National Asset Management Agency expects to launch its first qualified investment fund; the anticipated value of the QIF; the nature of the assets that will be managed by the QIF; and how the QIF will be marketed..

Minister for Finance, Michael Noonan: I intend to take questions 111, 112 and 113 together.

I am advised that NAMA, for and on behalf of the QIF, will make an announcement shortly as to the outcome of the tender competitions for investment manager and for custodian and fund administrator.

I am further advised by NAMA that the Qualifying Investor Fund (QIF) is expected to be launched, subject to regulatory approval, at the end of 2012. NAMA advises that the QIF will publish a prospectus which will set out the subscription process for QIF shares.  Investment in the QIF will be limited to qualifying investors (as defined by the Central Bank rules)

Deputy Pearse Doherty: To ask the Minister for Finance if he has plans to introduce legislation to give effect to so-called Real Estate Investment Trusts in NAMA; and if he has, the timetable for the introduction of such legislation..

Minister for Finance, Michael Noonan: I wish to inform the deputy that the introduction of Real Estate Investment Trusts (REIT’s) legislation is being kept under review by my Department. I am aware of NAMA’s interest in this structure as another option in monetising their portfolio.

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Spare a thought for poor old Marie Hunt, Head of Research at property powerhouse CB Richard Ellis. – she gets a complete page all to herself in the recently-published Shane Ross/Nick Webb book “The Untouchables”. Marie’s market commentary from before the boom where she anticipated a soft landing might be the subject of much merriment amongst some who didn’t act on the prevailing advice at the time, and of more serious finger-pointing by those who did, but remember, the woman’s name is “Marie Hunt” and NOT “Marie Gypsy Rose Lee Hunt”. Property experts are best able to tell you what has happened in the past and what is happening at present – as for the future, the only person claiming to know that, is the NAMA chairman Frank Daly who assures us he has an infallible spreadsheet macro which accurately predicts property prices. Marie Hunt certainly can’t tell the future, but she should be able to give us a sure-footed assessment of what is happening right now.

So today, we get CBRE’s commercial property commentary for September and October 2012. CBRE claims there has been an “escalation in activity” in the Irish commercial property sector recently. But “activity” includes supply of property and viewings and expressions of interest. If you look at the cold numbers, it’s pretty depressing.

Commercial property prices are dropping by an annualised rate of 10% according to the most recent Jones Lang LaSalle index – something not referred to by Marie. Rents are declining by about 3% annualised, again not referred to but Marie does say that prime rents are stable.

Investment property transactions stand at €271m for the first nine months of 2012. How does this compare with 2011? CBRE doesn’t tell us – tsk, tsk Marie! In fact it is up on the €180m reported for all of 2011 though considerably down on the €3bn recorded in 2006. Considering the incentives created in Budget 2012 last December – the reduction in commercial stamp duty from 6% to 2%, capital gains concessions and the abandonment of Upward Only Rent Review reforms – the figure is still very low indeed.

In terms of commercial property being rented, CBRE is upbeat, but what CBRE doesn’t tell us is how many new rental transactions are offset by old leases expiring. If Company A rents 10,000 sq ft in Building A for €15 psf and that lease expires and Company A rents 10,000 sq ft in Building B for €10 psf, then there is theoretically a 10,000 sq ft rental transaction but it really doesn’t tell you much about the property market. The only people for whom CBRE’s rental uptake figures are of interest are CBRE and its ilk and lawyers who draft leases and removal companies.

CBRE says yields on prime commercial property are stable or stronger and CBRE claims that prime Irish retail is generating 6% yields.

The report is downbeat on Northern Ireland with a reported slowing of both commercial sales and rentals.

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