Inside the world of business
Mazars' decision adds to the tension in SME issue
“MAZARS III” is the slightly melodramatic-sounding name of the third report by consultancy firm Mazars on lending to the small and medium enterprise (SME) sector which was published yesterday. The prequels, I and II, were commissioned by the Government after the bank recapitalisation programme.
But while the lending practices of banks might not seem the stuff of Hollywood spectacle, the trilogy did engender its own kind of drama yesterday. Within hours of the publication of the report, Isme, the representative body for the small business sector, issued a strongly worded denunciation of the report. Describing the report as “misleading and dangerous” Isme chief executive Mark Fielding accused the report of having “the fingerprints of its sponsor the IBF (Irish Banking Federation) all over it.”
Isme is not an organisation known for its understatement, but in this case, it does have a point. Mazars was appointed by the Department of Finance over a year ago to provide an independent analysis of the state of play in the SME lending sector. At the time the Department of Finance instructed the two main banks, through the IBF, to provide the consultancy firm with the information it needed to conduct its research.
While the integrity and academic rigour of Mazars is not in question, the decision to hold a joint press conference with the IBF yesterday is. The IBF and Mazars claim that the IBF’s only role was in “co-ordinating the process of data provision to Mazars”. If that is the case, there is no reason why the IBF should have had any role to play in the presentation of the results. Small businesses, not the banks, are the important players in this drama and an independent assessment of the lending situation is imperative in order to ensure this systematic sector of the economy is getting the help it needs.
Mazars says that, when the reports were initially commissioned, it was told that the Central Bank would assume the responsibilities of the IBF in the co-ordination of the reports.
The tensions that arose from yesterday’s report suggest the sooner this transition is achieved the better. If not, the entire process risks losing the confidence of the stakeholders it is supposed to serve.
Nationwide wind-down?
If anyone was still harbouring hopes that the National Asset Management Agency (Nama) would lead to new lending, Irish Nationwide would have put them straight at its 2009 annual results yesterday.
The building society’s chief financial officer, John McGloughlin, said the €280 million in Nama bonds that Irish Nationwide received from selling €670 million in loans would be used to pay back the lender’s bonds and the borrowings with the European Central Bank (ECB).
The Nama bonds will be used to lower about €800 million in loans that Irish Nationwide had drawn under the ECB’s year-long funding facility last July and bonds of €5.4 billion held by the building society.
Further Nama bonds from €3 billion in loans being transferred in the second and third tranches over the coming months would also be used reduce debts, he said. McGloughlin said the building society would look to raise up to €2 billion in the coming weeks on the sale of a State-backed bond, Irish Nationwide’s first under the extended guarantee.
So Nama and the guarantee is effectively keeping Irish Nationwide on life support while it prepares a viability report for the European Commission – a process that chief executive Gerry McGinn said could take more than a year to complete. A wind-down of Anglo may be difficult but closing the smaller Irish Nationwide must be considered a serious possibility.
Unlucky airlines
Puppet-lovers, Kildare hotel owners and fans of LCD Soundsystem have all been affected in various ways by the volcanic ash cloud erupting out of Eyjafjallajökull, but they will probably get over it. The future is somewhat murkier, however, for the European airline sector.
Despite the cold snap chaos at the start of the year, mutterings of industrial action at some airlines and actual industrial action at British Airways, turbulence in the airline sector was beginning to subside – or, at least it was if sector-watchers took the direction of share prices as their metric.
Share prices, however, are a notoriously unreliable reflection of what is actually happening in the underlying companies – although, to be fair, not even the most prescient of investors could have expected an Icelandic volcano to cloud their outlook. “At a minimum, this ash event will puncture bullishness about summer trading. The sooner it blows over, the better,” Bloxham’s analysts wrote in a note to investors yesterday.
The dust will have dispersed long before definitive numbers emerge from the airlines themselves. But in the case of British Airways, however, analysts were able to take the company’s admission that the March strike action cost the airline £40-£45 million in earnings as a base. According to Davy airline analyst Stephen Furlong, the more widespread disruption caused by the volcano means the hit on its profits will be “much larger” than the strike. No wonder chief executive Willie Walsh was keen to take a seat on the airline’s test flight: the view can’t be any worse from up there than it is on the ground.
TODAY
Embattled US investment bank Gold man Sachs is expected release its Q1 figures; IMF publishes global financial stability report; Ireland announces bond auction size
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