INSIDE THE WORLD OF BUSINESS
UK banks hatching plans to limit state involvement
THIS IS a big week for the UK banks as the chancellor Alastair Darling will outline the scale and status of the participation of Royal Bank of Scotland (RBS), owner of Ulster Bank, and Lloyds, owner of Bank of Scotland (Ireland), in the toxic loans alternative to Nama.
The UK government’s asset protection scheme (APS) will allow the banks to write down losses on loans over time. The two part-nationalised banks are busy hatching plans to limit state involvement in their institutions.
RBS, which is 70 per cent owned by HM Treasury, said it was considering further asset sales “not initially contemplated” as a means of escaping a heavier restructuring to win EU approval and curtail further state ownership. Once again, this raises questions about the future of Ulster Bank and its place within RBS.
Stephen Hester, chief executive of RBS, listed Ulster Bank as one of its “core” businesses last April and the bank has invested €2.06 billion into its Irish bank in five cash injections this year – a clear sign of parental support and commitment for a subsidiary.
Hester is radically reshaping the bank’s global operations. The group’s Asian retail and commercial operations have already been put up for sale but now the bank’s Churchill and Direct Line insurance arms and part of its investment banking business – as well as 300 RBS-branded branches in England and Wales – may also be offloaded.
RBS is planning to reduce the assets to be insured under APS to about £260-£280 billion, down from an original estimate of £325 billion.
Ulster Bank has quarantined £15 billion of its £54 billion loans, comprising mostly bad property loans, in a “non-core” unit, most of which is earmarked for APS.
The changes to be announced this week by RBS for APS are expected to have no impact for Ulster Bank. But the demands of the EU Commission will be closely watched by AIB and Bank of Ireland as their post-Nama restructuring plans must be vetted extensively and approved by Brussels. This could be the start of a long road for both banks and the EU’s demands should not be under-estimated, particularly following the condition set for Dutch bank ING that it hive off its insurance division to win approval for its rescue.
Quinn family values
TAKEN AT face value, the accounts for the Quinn Group indicate a company in rude good health: sales of €2.3 billion, underlying profits of €466 million.
This has to be welcome news given that it has underwritten insurance, investment and health products for vast swathes of the population. It also employs 5,500 people here and plans to pay €140 million in corporation tax this year.
Its strength is all the more remarkable given that it has had to write off €888 million in loans to its owners, the Quinn family, which were used to finance a disastrous foray in the markets and Anglo Irish Bank in particular.
We are now led to believe that the family – which took another €200 million in cash out the business last year – has mended its ways and indeed, according to the patriarch, Sean Quinn, made some potentially stellar investments in property.
The inference being that the activities of the Quinn family will never again jeopardise the financial strength of Quinn Group, a company that should it get into difficulties would send shock waves through an already fragile financial system and the wider economy.
At least this is what we are presumably to infer from the results for Mr Quinn is a man of few words. Unfortunately, actions still speak louder than words in this instance and Mr Quinn’s failure to disclose his disastrous stake building in Anglo Irish Bank says more about him than the faux humility which is his trademark. He has failed to provide an explanation for his behaviour and the resultant mess he helped create and which is now being cleaned up by the taxpayer. It is hard to have full confidence in the Quinn Group if you do not have full confidence in Mr Quinn.
Telecoms debate reopens
THE COMPULSORY debate on the Irish telecoms industry that accompanies a change in ownership at Eircom is back in full swing. In recent weeks Chris Clark (BT Ireland) and Robert Finnegan (3 Ireland) have both given interviews to this paper which have been highly critical of the former state operator. With Singapore fund STT set to take the reins in the new year, the local industry wants issues such as investment in and access to the former state telco’s network firmly on the agenda.
Green Minister Eamon Ryan used his speech to an internet industry event last Friday to wade into the debate. Eircom’s competitors have been complaining that it is resisting competition by not opening up its network to third parties at an economic cost. Mr Ryan took up the theme and sent a clear message to STT.
“We have failed in Ireland in the last 10 years. We’ve had a short-term private-equity model in some of our telecommunications companies … it didn’t think long-term, it didn’t think big, it didn’t think about investing in the state of networks we need. The new Programme for Government pledges universal access by 2012. I’ll be asking every provider and every state agency in Ireland to help us achieve this goal.”
Here’s hoping that pledge of the Fianna Fáil/Green programme for government lasts a bit longer than the proposed levy on banks to cover losses incurred by Nama, which was axed at the committee stage in the Dáil last week.
TODAY:
Shareholders in Independent News Media today decide on whether to remove company chairman Dr Brian Hillery and senior independent director Baroness Margaret Jay from their posts as sought by Denis O’Brien in his continuing battle with the company’s board over their plans to refinance the company’s debt.
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