Archive for May 16th, 2013

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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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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