Irish Economy Thread

[odlum833]

AIB & BoI pass European stress tests
Friday, 23 July 2010 22:26
Both Bank of Ireland and AIB have passed the stress tests carried out to establish how resilient they would be in difficult economic circumstances.

CEBS Q&A | CEBS Summary Report

The test subjected the banks to a programme whereby the economy could deteriorate, and suffer further damage from problems with international sovereign loans.

AdvertisementNinety-one banks across Europe were subjected to the test by the Committee of European Banking Supervisors. A total of seven failed.

In AIB's case, passing the test assumes that they would succeed in a €7.4bn plan to raise further capital by the end of the year.

If they fail to do so, the Government may have to step in to meet any shortfall in the capital requirements.

Bank of Ireland has already raised the capital required of it.

The banks had already passed more severe stress testing carried out by the Irish Financial Regulator in March.

The test was carried out under three scenarios: a benchmark scenario, an 'adverse' scenario and a worst-case scenario, which took into account the impact of potential losses on eurozone government bonds held by banks.

Bank of Ireland said that even in the third scenario, its Tier 1 capital ratio - a measure of banks' financial strength - would be 7.1%, well above the 6% needed to pass the test.


Analysts were watching to see how robust the latest European stress testing would be.

They feared that if too many banks got through, it would imply that the test would be meaningless.

Property lending specialist Hypo Real Estate was the only German bank to fail the stress tests. Five Spanish savings banks also failed to meet the criteria. A Greek bank state-controlled ATEbank
also failed the test.


France fared better, with all four of its major banks - BNP Paribas, Societe Generale, Credit Agricole and BPCE - passing with a clean bill of health.

Minister for Finance Brian Lenihan has welcomed the outcome of the tests for AIB and Bank of Ireland.

He said they vindicated the financial targets set for the banks by the Central Bank and Financial Regulator earlier this year.

Minister Lenihan said he welcomed the increased transparency that the EU-wide test had brought to the banking system.

The minister also said that the Financial Regulator was in close contact with the banks to assess the results of the test and their implications, and in particular any need for recapitalisation.

However, he said the results of the worst-case scenario in the tests should not be considered as representative of the current position, saying they were based on 'extreme assumptions rather than expected outcomes'.

Meanwhile, an analyst with BGC Partners Howard Wheeldon has said there has been some scepticism that the tests were not tough enough.

ww.rte.ie

[Thefancydanhimself]

Stress test results buoy banks
PAMELA DUNCAN

The results of the European stress tests on the banks which were published late last week continued to buoy volumes amongst the Irish banks with Bank of Ireland performing well again today.

The "star performer" of the day, Bank of Ireland finished up by 7 per cent at €0.84 in keeping with its British counterparts which also traded well. The bank enjoyed activity levels of 79 million between the UK and Irish markets.

AIB did not fare as well finishing down by 0.11 per cent and closed at just under €0.95. One trader said the variance between the banks was because AIB had a lot more risk attached to it than its counterpart given that it did not pass the stress test in as comprehensive a manner.

Irish Permanent also benefitted by an improved sentiment toward the banks finishing up by 3.7 per cent at €1.63.

Ryanair closed down by 2.9 per cent, something which traders attributed to the announcement that Michael O’Leary was to sell five million shares in the company leading to speculation in the market and a subsequent fall to €3.83.

Having performed strongly earlier in the day CRH finished pretty much flat at €16.50, up a mere 0.1 per cent on the previous day. Smurfit Kappa finished up by just over 1 per cent finishing up at €7.95 while Kingspan closed at €5.56 up 1.53 per cent.

Icon was badly hit following results out today which saw it finish down 9 per cent in the US although it only finished down by half a per cent in Dublin .

Both Aryzta, which closed at €30.48 and Kerry Group, which closed at €24.55 were down on the day by 2.7 per cent and 1.4 per cent respectively.

European shares rose to a five-week closing high as strong results from UBS boosted banks, but more than half the market's early gains were erased after data showed a drop in US consumer confidence.

The FTSEurofirst 300 index of top European shares advanced for a sixth straight session to finish 0.5 per cent firmer at 1,054.17 points, its highest close since June 21, but much lower than the index’s intra-day high of 1,061.46.

Banks raced higher, with the STOXX Europe 600 banking index rising 4.7 per cent, after UBS posted second-quarter net profit well above forecasts. The sector was also boosted by a scale-back of looming capital reforms and a longer timeframe to implement changes.

UBS surged 11 per cent, while Societe Generale, Barclays and Credit Agricole rose between 7.7 and 10.6 per cent.

European shares erased a significant part of earlier gains after data showing US consumer confidence sank in July to its lowest since February, underscoring the slow path to economic recovery. US home prices rose in May but without signs of a sustained rebound.

Among oil stocks, BP slipped 2.6 per cent. It unveiled a $17 billion quarterly loss due to the costs of the Gulf of Mexico oil spill, but launched a plan to repair its battered image, ditching its chief executive and promising to slim down by trebling an asset sale target to $30 billion.

The Euro STOXX 50, the euro zone's blue chip index, was up 1 per cent at 2,769.31 points. It faces the next near-term resistance at around 2,805 points - its 200-day moving average and a 61.8 per cent Fibonacci retracement of a fall from a high in April to a low in May.

Across Europe, the FTSE 100, Germany's DAX and France's CAC 40 rose 0.2 to 0.8 per cent, while the Thomson Reuters Peripheral Eurozone Countries Index was up 1.8 per cent.

Irish times

[gothicform]

story in today's independent on how ireland has the highest net emigration levels in europe - 40,000 people left last year, and the irish govt is expecting 200,000 to emigrate between now and 2015. the average irish household is 3.9 people meaning over 50,000 homes are expected to become empty as a result.

[belfastuniguy]

Originally Posted by gothicform

story in today's independent on how ireland has the highest net emigration levels in europe - 40,000 people left last year, and the irish govt is expecting 200,000 to emigrate between now and 2015. the average irish household is 3.9 people meaning over 50,000 homes are expected to become empty as a result.

Indeed, read that in the Belfast Telegraph.

Irish emigration soars as Celtic Tiger’s cubs hunt for jobs

The number of people leaving the Republic has swelled far beyond those of every other country in the European Union, says research.

An estimated 40,000 people emigrated last year, according to the EU's statistics office, Eurostat, a rate almost twice as high as that of Lithuania, the next most affected country.

It is expected the flow may worsen as the Republic faces years of severe financial difficulties. A research institute has warned that 200,000 people, in a country of 4.5 million, may be forced to emigrate by 2015 if job opportunities do not improve.

The unprecedented prosperity of the so-called Celtic Tiger years seemed to have consigned emigration to the history books. Its reappearance is regarded with dismay.

Some of those leaving are thought to be immigrants who came to Ireland in large numbers from mainland Europe over the last decade and who, unable to find jobs, are returning home.

But a large proportion are young Irish men who, with unemployment at over 13%, see little prospect of work in the near future.

Large numbers in the building industry — so important to the economy — are on the dole. Many are contemplating leaving the country as construction has almost shuddered to a halt.

The return of high levels of emigration is just one of many negative factors in a country which considers itself among those hardest hit by the global recession. It has not been plunged into poverty — some say that it has merely returned to the economic standards of 2000.

But its debt is huge and the general population has been hit hard by government cuts and raised taxes. Many more cuts are on the way, the government has warned, over the next few years.

House prices have tumbled, while there has been a dramatic rise in debt, insolvency and winding-up of companies.

In another indicator, the average cost of hotel rooms has dropped back to 1999 levels, with one third of hotels having difficulty meeting interest repayments on their bank loans. A spate of building, encouraged by the government with generous tax breaks during the boom years, means Ireland has an excess capacity of some 10,000 hotel rooms.

All this has produced huge public anger against bankers, developers and politicians. Fianna Fail, which has been in power for more than a decade and presided over the boom years, is deemed to have no chance of re-election.

[Catmalojin]

Brighter outlook from Central Bank
Friday, 30 July 2010 11:18

The Central Bank, in its latest report, has raised its forecasts for the Irish economy this year, though it warns that unemployment will not start falling until next year.

The Bank says a strong performance by exporters, in particular multi-national companies, has made up for continuing weakness in the domestic economy.

But it expresses concern that high debt levels in many countries and continuing worries in financial markets could slow, or even derail, the international recovery.

The bank's quarterly bulletin forecasts that the Irish economy, as measured by gross domestic product, will grow by 0.8% this year, though gross national product will fall by around 1%.

GNP excludes profits made by multi-national companies here. These forecasts are better than the bank's previous forecasts in April.

The bank is forecasting growth of 2.2% to 2.8% in both measures next year.

Story from RTÉ News:
http://www.rte.ie/news/2010/0730/economy.html

Unemployment is the real issue now, and will remain so for a long time.

[odlum833]

Google to create 200 jobs in Dublin

Google has announced the creation of 200 jobs in Dublin at a new operations centre.

The company already employs 1,500 people in Barrow Street, Dublin 4, and the new centre will be based in Eastpoint Business Park.

The centre will focus on the company's location-based products, such as Google Local and Google Maps, and plans to be up and running this year.
Advertisement

The company said recruiting has already started for entry-level graduates with one or two years' experience and 'strong' IT skills.

'Dublin is rapidly becoming the multilingual internet capital of Europe and Google is proud to be leading the charge on this and further increasing our presence here,' David Martin, the company's director of Geo Operations in Europe, said.

This is very significant not for the number of jobs but simply that expansion in these companies continues here and it's a major statement on the economy's ability to be competitive in these industries.

[nordisk celt83]

More very bad news. I fear the repercussions of this could be very precarious for Ireland. At least it will seal the fate of Cowen, FFer's and co...




State borrowing costs rise following credit rating cut

Shares in Ireland's biggest banks dipped while Government bonds have widened following the decision by international ratings agency Standard & Poors (S&P) to cut the Republic's credit rating.

The extra yield investors demand to hold Irish 10-year bonds instead of their German equivalents widened to 332 basis points this morning.

On the Iseq index, shares in AIB fell by 2.3 per cent to 78 cent by 10.22am while shares in Bank of Ireland were down 2.2 per cent to 73 cent.

S&P cut the Republic’s rating from AA to AA minus, which means it believes that there is an increased risk that the State will not be able to meet its liabilities.

The ratings agency based its calculations on a €50 billion estimate for bank recapitalisation, which the National Treasury Mangement Agency (NTMA), described as extreme, and Nama’s €40 billion liabilities.

Commenting on the news, the NTMA, which is responsible for managing the State’s debts, said that is has already met 99 per cent of this year’s Exchequer borrowing requirements. It argued that SP’s approach to analysing the Republic’s liabilities was flawed.

NTMA chairman John Corrigan today described the downgrade as disappointing but said he was not surprised.

Speaking on RTÉ radio this morning, Mr Corrigan accepted there was still uncertainty about the transfer of loans to the National Asset Management Agency (Nama) but said S&P's estimate as to the cost of repairing the banking system was "at the extreme end of any analyst's comment."

He said S&P's analysis does not allow for underlying assets in either the top banks or in Nama, which he claimed would be realised over the medium term.

"They haven't measured the cost on a net basis (and) that's essentially our argument with them...the key issue is how you measure the net debt and they have made no allowance whatsoever, they attribute no value whatsoever, for the assets which Nama are acquiring," said Mr Corrigan.

"To put this into perspective about 25 per cent of the underlying collateral in Nama relates to property in London. Is Standard & Poors seriously suggesting that such property is worth nothing?"

Mr Corrigan said the approach adopted by S&P did not accord with any international standard and was so unique that the credit rating firm had needed to publish a technical addendum to their paper explaining how they arrived at their calculations.

Fine Gael said the deterioration in Ireland's credit rating was due in part to uncertainty over the final cost of the bank rescue.

“When the Government nationalised Anglo Irish Bank, almost two years ago, Minister for Finance Lenihan estimated the cost at €4.5 billion. Last week he said the cost would not be around €24 billion. The markets do not believe him. This huge amount of money, together with the recapitalisation costs of the other banks, as well as the overhang of NAMA, have spooked the markets and have caused the S&P downgrade," said the party's finance spokesman Michael Noonan.

“Minister Lenihan must give certainty to the markets. He must provide a final figure on the cost of the bank rescue. He must show, if he can, that Anglo is still worth rescuing rather than winding it down in an orderly fashion as proposed by Fine Gael," he added.

Labour Party finance spokeswoman Joan Burton said that after the latest downgrade, the coalition's banking policy was in disarray.

“Confidence is a key component of a recovery strategy and it is very evident today that there is very little confidence either nationally or internationally in the current Government’s capacity to get to grips with the true costs of the Irish banking collapse.”

Separately, Sinn Féin's finance spokesman Arthur Morgan said the credit rating downgrade further undermined the Government's banking policy.

He said the effect of this downgrade would be crippling for the whole economy as the higher cost of borrowing will lead to a further obliteration of public services as more and more funds would be diverted to paying these increasing costs.

“The cost of borrowing will increase once more for the Irish Government as a result of their perverse allegiance to an ailing banking system. Standard & Poor’s have lent their voices to the growing professional opinion that the ultimate costs of bank bailouts will surpass original estimations, doubling to as much as €50 billion," he said.

“Once more, the Government banking policy has been undermined. This Government are digging a huge hole in the public finances and the dual burdens of NAMA and Anglo Irish bank are crippling Ireland’s credit rating, making it impossible to borrow for stimulus and investment, which is needed to plug this black hole," he added.

http://www.irishtimes.com/newspaper/...reaking16.html

[odlum833]

Posted my thoughts in the other thread.


S&P lowered Ireland's debt rating 1 notch last night.

http://www.cnbc.com/id/38838316



The NTMA takes issue with S&P's definition of net debt here and they have a right to be angry. Incredibly the ratings agency appears to have overlooked the value of assets going into NAMA. These guys (the rating agencies) are looking to regain credibility - they don't seem in touch with what is going on. They seem to think NAMA is intended to be a net liability rather then an asset. Given so much of it's loan book is outside of Ireland that is an incredible assertion to make about other property markets, not only our own.

Video here


http://www.bloomberg.com/video/62421132/

[nordisk celt83]

eh...

John Corrigan, eh that is!

[gothicform]

well a 90 billion euro loss equals 63% of GDP... and that's before interest is taken into account too.

[Lockheed_F-22]

I see that we started borrowing a little bit less, it would be good if this was also done by the government, not only households

Falls in lending were bigger in July

http://www.rte.ie/business/2010/0831/credit.html

Tuesday, 31 August 2010 13:04

Figures from the Central Bank show that lending to households and businesses continued to fall in July.

The bank said lending to households was down 4.7% compared with a year earlier. The annual drop was 4.5% in June. The drop for mortgage lending was 1.6%, but lending for other areas slumped by 15.4%.

On average, the Central Bank said, the amount of money being re-paid by households has exceeded the amount of new money being lent by more than €800m a month in recent months.

Lending to businesses was down 3% in July compared with a year earlier, bigger than the 2% annual drop in June. The Central Bank said the biggest decline in business lending was for loans of more than five years, while short-term loans of less than one year showed growth.

Deposits from Irish households were down 1.9% in the year to July.

Meanwhile, the total amount of outstanding European Central Bank loans owed by the main Irish financial institutions in July was €58.3 billion.

[Lockheed_F-22]

Proof that we're finally experiencing an economic growth

Sales of Jameson whiskey up 12%

http://www.rte.ie/business/2010/0902/pernod.html

Thursday, 2 September 2010 07:45

Sales of Jameson whiskey grew by 12% in the past year, according to results from its owner Pernod Ricard.

The company, one of the world's biggest makers of wine and spirits, said there was strong growth in emerging markets, but persisting difficulties in Western Europe, especially in Spain, the UK, Ireland and more recently in Greece.

The company said it experienced a 'contrasting economic environment' that saw strong growth in emerging economies, signs of recovery in Europe but only a 'very gradual recovery of consumer spending in the US against a continuing uncertain backdrop.'

Pernod Ricard said its revenues for the year ending June 2010 fell by 2% to €7.081 billion after the disposal of some of its brands including Wild Turkey and Tia Maria.

Profits from operations rose by 4% to €1.795 billion with 'outstanding' organic growth of 14% seen in Asia and the rest of the world due to dynamic sales of Martell in China and local brands in India. South Korea also saw a sales improvement as well as the duty free markets and strong growth in Africa and the Middle East.

Pernod Ricard said that Europe, excluding France, was the region most affected by the economic crisis with a 3% fall in profit from recurring operations. However, Russia and the Ukraine reported a strong upturn in the second half of the year. France saw 'satisfactory' growth of 7% during the year.

Chief executive Pierre Pringuet said the group's priorities for the current financial year were the development of its premium strategic brands, marketing investment and the reduction of debt.

The company said it would propose a dividend of €1.34 per share.

[gothicform]

I see that we started borrowing a little bit less, it would be good if this was also done by the government, not only households

deposits are also down so people are saving less. the figures from what i can see is that people are unable to save and spending savings, and unable to borrow too (the entire irish housing market is completely jammed up as a result of this too). if things were improving deposits would be up and consumer borrowing down.

[Lockheed_F-22]

Slowdown in service sector growth

http://www.rte.ie/business/2010/0903/economy.html

Friday, 3 September 2010 13:40

A report has shown that activity in the service sector of the economy grew again last month, but at the slowest pace since May.

The NCB Services Purchasing Managers' Index recorded 52.9, down from 55.7 in July. Any figure above 50 means growth.

The drop in the index came despite faster growth in new orders from home and abroad. NCB also said optimism about the service sector's future remained at high levels. The confidence index rose to 68.6.

But the survey showed that companies again reduced employment levels, and at the fastest pace since May. This part of the index recorded 47.4, down from 49.5 in July.

Reduced salary payments meant companies' costs fell again, but only slightly, while prices charged by firms also dropped, with companies blaming intense competition and pressure from customers.

[Lockheed_F-22]

This would have to deal more with Real Estate, but since we don't have that type of thread, I'll post it here, which shows that we still are in deep $h!t
40% fall in new homes registered
http://www.rte.ie/business/2010/0906/houses.html

Monday, 6 September 2010 15:02

Figures from home guarantee scheme Homebond show that the number of new homes registered last month was down by almost 40% from August last year.

Homebond said 149 new homes were registered in August, down from 245 in August 2009. This is an improvement from July, however, as only 61 homes were registered in than month.

The Homebond figures are seen as an indicator of future housing activity. Homebond is the bigger of two companies which provide registration figures, the other being Premier.
Advertisement

Only 45 new homes were registered in Dublin in the month, with 22 in Cork. There were no new homes at all registered in seven counties.

[juancito]

I had no idea that that much people started moving to Ireland after the economic boom, thank you for educating me in regards to the numbers. I had no idea that Ireland was affected at that level, considering that it was one of the most robust economies in Europe. Learning a lot on how this effect started in the USA has affected many partners around the world, including the Island I come from which is Dominican Republic.

[Lockheed_F-22]

New Look's new Dublin store to create 121 jobs
http://www.rte.ie/business/2010/0907/newlook.html

Tuesday, 7 September 2010 12:53

UK fashion chain New Look has said its planned new store in Dublin's Jervis Centre, announced earlier this year, will create 121 jobs when it opens in early November.

The 30,000 square feet store will be New Look's 29th in Ireland, bringing total employment to almost 1,000. It will also be the company's largest in its entire chain.

New Look will occupy ground and basement levels in part of the former Arnotts Project store.

Earlier this year, the company shelved plans for a stock market flotation in the wake of financial turmoil.

The decision marked the second time in two years that New Look's owners had scrapped an initial public offering (IPO).

Earlier this year, the Jervis Centre said US fashion giant Forever 21 would open its first European store in the centre in November.

[gothicform]

market interest levels on irish govt debt continues to increase.... 6.1% now

http://www.rte.ie/news/2010/0907/economy_bonds.html

[odlum833]

That was just uncertainty ahead of a decision on Anglo Irish Bank

Govt decides to split Anglo into two banks

08/09/2010 - 14:57:21
The Government has decided that Anglo Irish Bank will be split into a funding bank and an asset recovery bank.

The state-owned bank – €8.2bn in the red and in need of a potential €25b bail-out – will be divided in two with one wing holding deposits and the other dedicated to managing good loans which will be run down over time.

The new bank divisions will not lend money.

Finance minister Brian Lenihan, who spent the last two days in tough talks with European Commission chiefs and European counterparts, said the move should help restore confidence in the financial system.

“Today’s decision by the Government will provide certainty about the future of Anglo-Irish Bank,” he said.

“Resolution of this, our most distressed institution, is essential to the promotion of confidence and stability in our financial system.”

Anglo Irish Bank has not expanded its loan book since it was nationalised in early 2009 and this will remain the case.

It is intended that the recovery bank will be sold in whole or in part or that its assets will be run off over an unspecified period of time.

Anglo management had favoured a good-bank bad-bank split with 80% of the toxic lender shut down and a new viable bank created from the good loans.

Mr Lenihan said Anglo’s proposal had been put forward in good faith but warned it would not have provided the most viable and sustainable solution to ensure the stability of Irish banking.

Taoiseach Brian Cowen had warned a quick wind-up of the bank would leave the taxpayer with a bill for €70bn.

The Cabinet was briefed on the plan to create a Funding Bank with Government backing and guarantees to operate as a specialist deposit bank.

The Government said it will be completely separate from the loan assets and people who leave money in the bank will be totally insulated from the performance of the second wing of the bank.

The Assets Recovery Bank will be focused on running down the loan book which is not being transferred to the state controlled National Asset Recovery Agency (Nama) bad bank.

The total cost of setting up the two new divisions and ensuring they are viable will be worked out by experts from the Central Bank and announced in October.

Read more: http://www.breakingnews.ie/ireland/g...#ixzz0ywx8h6oI

Interest rates are falling back rapidally after this decision. Back under 6% already in fact.


Meanwhile Moodys ratings agency has just upgraded Bank of Ireland.

[nordisk celt83]

It just perpetuates the debt spiral, and pain to Irish taxpayers. Although, it would appear that's better than the alternative of defaulting...