Dominic Coyle answers your questions

Getting your due from Vodafone

Not having opted to retain any of the B shares, I have received a cheque and new ordinary share certificate from Vodafone. My understanding was that Vodafone was, in effect, distributing the proceeds of the sale of its Japanese interests to its long-suffering shareholders, a small-payback for those who have sustained heavy losses on their shareholding.

I did not realise that in tandem with this distribution of new B shares they were also reducing my holding of ordinary shares by one-eighth or 12.5 per cent. What this amounts to is a forced sale of 12.5 per cent of my shares at a price of €1.756 or £1.198 per share, a substantial loss for those of us who received Vodafone shares at the time of their deal with Eircom.

I, obviously wrongly, thought that I would retain my existing holding of shares and receive a payout of 15p per share as a modest reward or loyalty payment for holding onto the underperforming shares, whereas all Vodafone has done is to force me to sell them one-eighth of my holding at a price of their choosing. I feel as if I have been mugged again by Vodafone. Mr R.C., e-mail

I guess the first thing to point out in relation to the Vodafone shares is that the chance of any former Eircom shareholders selling their Vodafone stock at anything but a loss now or at any foreseeable point in the future is up there with Bertie telling us all to vote for Fine Gael. It's just not going to happen.

Leaving that aside, I think you are being a little bit hasty in condemning Vodafone on this occasion. The company has, as you say, received a lump sum in return for the sale of its interests in Japan and decided that it was time to give something back to what you rightly point out are long-suffering shareholders.

The method it chose was a share buyback and the way it engineered this was through the return of capital and creating the new B shares, which were instantly redeemable. This is not unique. It follows a path chosen by, among others, First Active.

It is also worth mentioning that this share buyback was equally apportioned across the entire company share register. In other words, everyone has effectively seen their stake reduced by an eighth. It is not as though you are being disadvantaged compared to other shareholders.

In fact, your position has been somewhat strengthened. You now own the exact same percentage of Vodafone as you did before the redistribution but, given the share price has fallen by about 8 per cent and the share capital has been reduced by about 12 per cent, each share you hold is now relatively more valuable.

There was only one way of trying to ensure that this redistribution did not happen and that was to vote against it at the extraordinary general meeting (egm) that was held to approve the redistribution. The people who are now receiving cheques are, by and large, those who did not exercise a choice on how the B shares should be encashed and those are also, in general, the people who did not exercise their shareholder mandate by voting at the egm.

Without labouring the point, people should not be surprised at what has happened. It was explained in quite an amount of detail in the information packs sent out to shareholders ahead of the egm.

Quid pro quo on interest rate rises

The ECB raised interest rates at the start of this month for the fourth time in a short number of months. The banks and other financial institutions have wasted little time in passing these hikes onto mortgage holders. Clearly this adds to the already massive burden on homeowners, especially those who have borrowed huge sums, as their monthly repayments increase and increase.

As someone without a mortgage, is it unfair for me to feel aggrieved that banks haven't been as keen to increase interest rates on savings and deposit accounts? I have an online savings account with one of Ireland's larger banks and I have yet to see any change in my rate of return. It's no wonder Irish banks are the most profitable in Europe!  Mr R.M., Dublin

My only surprise is that you are surprised. Is it fair? No, hardly. But then this is a commercial situation and fairness doesn't really enter into it. The banks will raise the cost of borrowing speedily because their own borrowing costs are rising.

There is no such incentive for them on the savings side of the equation. Put simply, the longer they can hold off increasing their rates on saving accounts, the more profitable for them. And, if they can get away with handing over only part of the quarter-point increase to their savings customers, they will be able to beef up profit margins over the longer term.

This is increasingly important as the mortgage market is increasingly dominated by tracker products that limit the financial institutions' ability to massage margins on that side of their business.

Ultimately, it comes down to competition. With all that SSIA money floating around, banks will be quick to ensure the savings rates they offer are not undermined by a major competitor - either an existing market player or a new arrival to the business, as happened in the mortgage market when Bank of Scotland entered the market.

While I can understand how annoying it is for people with bank savings, can you imagine how much more frustrating it would be for someone who, unlike you, does not work in the financial services sector?

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.