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More Billions to go down the Irish banks black holes

A report from Goodbody Stockbrokers has argued that the State cannot bear the losses from the banking crisis on its own.

In a report on Irish debt levels, Goodbody says there should be some form of risk-sharing with bondholders. But it adds that Ireland cannot do this on its own, and should push for a Europe-wide solution to the problem.

Goodbody says some €21 billion of bank debt should be restructured now – otherwise there will have to be a restructuring of Irish sovereign debt some time after 2014. Goodbody economist Dermot O’Leary says a new government must act urgently, as two-thirds of these bondholders are due to be repaid over the next 24 months.

Goodbody estimates the savings to the taxpayer could be around €10 billion if a 50% haircut were applied to the outstanding stock of unsecured, unguaranteed senior and subordinate bondholders.

The stockbroker believes Ireland will not reach the target of a 3% of GDP budget deficit by 2014, as foreseen under the four-year plan. Instead it believes the deficit will still be 4.3%, and the debt/GDP ratio will reach 115%.

The report also warns that reducing Ireland’s debt to levels required by the EU Stability & Growth Pact could take 20 years of tight budgets, even if the targets set out for the next four years are met.

Goodbody says the costs of the banking crisis make it less likely that Ireland will be able to pay back its debts in the future. It has raised its estimate of the cost of the banking crisis to €57.5 billion or 36% of gross domestic product.

‘The new Government has a small window of opportunity to convince the EU that it is in everyone’s interest to implement a more comprehensive reform of the banking system, which recognises that the Irish sovereign can no longer support the burden alone,’ said economist Dermot O’Leary.

Other options suggested by Goodbody are allowing the European Financial Stability Facility to directly recapitalise weak banking systems such as Ireland’s or facilitate the sale of Irish banking assets through an EU-wide insurance scheme.

The Goodbody report also says a reduction in the interest rates charged under the EU/IMF bail-out is needed. It calculates that every one-point reduction saves €675m a year in interest payments.

Ireland will need more EU help to raise funds – NCB

Stockbroker NCB has said that Ireland will need further EU help after 2013 to raise funds. It says a lowering of the interest rate on EU loans would give Ireland a higher probability of weaning itself off aid by 2014.

The ‘Ireland Moves Forward’ report also identifies state assets that could be the first to be sold off to help the Government finances, including those in the areas of forestry, energy, networks and ports.

The report says Ireland can look forward to a two-tier jobless recovery in 2011 with exports continuing to grow but domestic demand remaining weak. It says that the country’s competitiveness has improved significantly through the economic downturn.

It also points out that foreign direct investment in Ireland increased significantly last year, despite the global pot declining by 8%.

NCB says the country will be rolled into the European Stability Mechanism (ESM), the permanent EU crisis mechanism to replace the current European Financial Stability Fund.

It says a lowering of the interest rate on EU loans would give Ireland a higher probability of weaning itself off aid by 2014.

But it argues that any post-general election attempt renegotiation of the terms of the EU/IMF financial support for Ireland would lead to a deal that looks ‘very similar’ to the existing one.

It says the only changes would be in the exact details of how the €15 billion in budgetary corrections in coming years are achieved. However, NCB does see changes to the interest rate taken at a European level as likely in the coming months.

Today’s report says the Irish banks remain reliant on the state for capital and on the ECB and Irish Central Bank for liquidity. It adds that the March stress tests will determine whether any additional capital is needed apart from the €10 billion already earmarked for the financial institutions.

NCB predicts that the National Asset Management Agency will be a major ‘dictator of activity in 2011’ and beyond.

NCB says the VHI, Coillte, Rosslare Port as well as energy sector assets like Bord Gáis and the ESB with generation and supply assets should be sold off ahead of network assets such as distribution and transmission.

Today’s report also says there are further falls in house prices with a further 10% fall from peak levels expected.

NCB says that the Irish equity market is no longer a reflection of the Irish economy. The report notes that Irish derived profits now represent 17% of overall profit in its sample of recommended Irish shares. That compares to 36% in 2006.

It says publicly quoted food and construction companies are likely to be active acquirers of other businesses this year, while the area of renewable energy/cleantech industries continue to be an area of significant investor interest.

source:http://www.rte.ie/news/2011/0208/economy-business.html

Comment:

As Max has been saying we are still not been told the real figures and we continue to get a drip drip feed on this financial disaster .Now Dukes comes out and tells us that we must pump 15 billion more into these toxic black holes that is now All of the Irish Banks

The two main contenders for the top jobs in the new Government are choosing to ignore the real problem that is because they are themselves not in a position to understand the debt of this financial meltdown

The Banks must be allowed to fold and a new commercial bank that has new capital be brought into existence. The new 15,000,000,000: and not forgetting the new 1,500,000,000 for Bank of Ireland  billion  could be better spent in a new jobs stimulus packet and new Bank credit for small business

For God sake anybody with a atom of sense should know this !

See the Republic of Ireland’s national debt mount up, a measure of the legacy the Irish Government is in the process of bequeathing to the children of Ireland:

€ 95,314,656,426

The FINANCE DUBLIN Irish Government Debt Clock was set at midnight on June 30th 2009, when it was €65.278 billion It updates the latest figures for the National Debt of Ireland. The clock is re-set periodically, to reflect changes in debt and deficit estimates from the Dept of Finance, the National Treasury Management Agency (NTMA), and independent economists.

Hangover for Irish Banks

Central Bank of Ireland located on Dame Street...

Image via Wikipedia

MONDAY’S jump in banking stocks was followed by a hangover yesterday as the country’s lenders pared most of the gains posted in the session.

Bank of Ireland fell 4pc to 69c after Standard & Poor’s (S&P) cut its outlook to “negative” from “stable” and warned that the lender faces “considerable challenges” restoring its credit profile as the Irish economy recovers slowly.

“Our view is that the Irish economy is likely to recover only quite slowly, with household finances remaining stretched, asset prices unlikely to start appreciating materially for a couple of years and credit demand remaining muted for many years,” S&P said in a gloomy forecast.

Allied Irish Banks, fresh from celebrating the sale of its stake in Bank Zachodni, tumbled 4.6pc to 75c as ING Group said the bank “is not out of the woods yet”, following the sale and is still “likely” to end up in majority state ownership.

Another stock feeling groggy yesterday was Norkom which tumbled 15.8pc to 80c, extending the previous session’s 24 decline following a profit warning.

CRH was another loser, slipping 1.9pc to €13.20 after the building materials company was downgraded to “neutral” from “outperform” at Credit Suisse by equity analyst Harry Goad. His target price is €14 per share.

The ISEQ ended the session down 20.44 points, or 0.7pc, to 2795.04 points. Elsewhere in Europe, stocks were little changed with the Stoxx Europe 600 Index close to a four-month high, as better-than-estimated US retail sales offset a selloff in utilities and a slump in German investor confidence.

Stocks initially rallied after a government report showed sales at US retailers climbed in August for a second consecutive month. Separate figures from the ZEW Centre for European Economic Research showed German investor confidence fell more than economists forecast to a 19-month low in September.

In the UK inflation unexpectedly exceeded the government’s 3pc limit for a sixth month in August; while a UK housing-market gauge fell more than economists expected in August to the lowest since May 2009, according to the Royal Institution of Chartered Surveyors.

Electricity companies RWE and E.ON dropped after brokers downgraded Germany’s largest utilities. Philips lost 3.9pc after the world’s biggest lighting company set new financial targets for the next five years. Gamesa Corporacion Tecnologica paced advancing shares amid takeover speculation.

ARM Holdings retreated 4pc after the company said a number of executives sold shares in the UK designer of semiconductors that power Apple’s iPhone.

Ladbrokes dropped 1.2pc after Goldman Sachs downgraded its recommendation on the bookie to “sell” from “neutral.”

– Thomas Molloy

Irish Independent

 

Comment:

This comes as no surprise to me as I have pointed out in previous posts the two main banks are from any normal booking keeping standards, they are both bankrupt

They are engaged in hiding enormous losses behind dioubious financial instruments called derivates as they are not going to disclose these losses

I believe they are trying to drip feed the markets over the next 3-5 years if they can get the time from the government or they will try to pass them off to NAMA

There is some credence to this method as NAMA is the ideal vehicle to do so through the Toxic toilet that is Anglo Irish Bank

Stay away from Irish  bank shares as I expect the State will eventually end up owing a majority holding of Allied Irish Bank and possibly a 49% stake holding of Bank of Ireland at best!

Cowen & Lenihan spin doesn’t wash with the markets

SAN FRANCISCO (MarketWatch)

Standard & Poor’s Ratings Services downgraded Ireland’s credit rating Tuesday on concern about the cost of bailing out the country’s ailing banks.
S&P lowered Ireland’s long-term sovereign credit rating to AA- from AA and kept its outlook on negative, suggesting the ratings agency could cut again.
The downgrade applies to other ratings that depend on Ireland’s sovereign credit rating, including senior unsecured debt ratings on government-guaranteed securities of Irish banks, S&P noted.
The Irish economy, like many around the globe, is struggling, but well-to-do visitors are returning to the Emerald Isle to take advantage of more attractive pricing for lodging and a chance to enjoy its storied golf links.
“The government’s support of the banking sector represents a substantial and increasing fiscal burden, which in our view will be slow to unwind,” Standard & Poor’s credit analyst Trevor Cullinan said.
The euro /quotes/comstock/21o!x:seurusd (EURUSD 1.2633, +0.0006, +0.0475%) recently traded at $1.2624. That’s lower than it was earlier Tuesday and down from $1.2684 late Monday.
Like several developed countries, Ireland bailed out some of its largest banks in the wake of the 2008 financial crisis. Anglo Irish Bank was nationalized.
The government recently got European Commission approval to inject another 10 billion euros into Anglo Irish Bank, on top of the 14.3 billion euros it already provided. That’s sparked concern Ireland may have to spend more on new support for other banks.
While such bailouts may have averted a much harsher global recession, they have left several developed countries burdened with more debt. Read about the sovereign debt crisis.
90 billion euros
The total cost of Ireland’s support for its banking sector may now reach 90 billion euros ($114 billion), or 58% of GDP, S&P estimated. That’s up from a previous forecast of 80 billion euros.

Comment:

The government’s lies to the markets is not working as we see by the latest Standard & Poor’s Ratings downgraded of Ireland’s credit rating this evening
Anyone that now still believes a single word out of Cowens or Lenihans mouths is guilty of plane stupidity
Surely the people who are backing these two clowns must now begin to question the sanity of their undying support for their pals in Anglo Irish Bank and the NAMA fraud that was set up to bail out the golden circle
These clowns must be stop before we are all totally ruined and condemned to go back to the depression of the 70,s or even the 50,s

Preliminary Report Into Ireland’s Banking Crisis 31 May 2010

After reading the Preliminary Report into Ireland’s Banking Crisis one can only come to the conclusion that Cowen and Lenihan are Guilty of “Gross Incompetence and Dereliction of Duty”
And should resign immediately and be brought before the courts
on charges of economic treason !

Preliminary Report Into Ireland’s Banking Crisis 31 May 2010

The right to work Campaign (3)

David Mc Williams in his latest posting Memo to ECB: print money

David Mc Williams in his latest posting Memo to ECB: print money

Highlights the conundrum the Germans now find themselves in!


As the paymasters of Europe, they are not happy in this unforeseen roll and the opposition in Germany is growing as we see with the loss of North Rhine-Westphalia see article here

In last week’s elections in Germany, by the ruling party of Angela Merkel.

Where this leaves the Euro is another question, I think too much has been invested in the Euro enterprise, so much so that I don’t expect to see the Germans just ditch it anytime soon!

The latest support package for the beleaguered Euro is testimony to the fight the Germanys are still prepared to put up, to save their investment in the single currency.

But what have the Europeans really agreed to?

From here it looks like a giant NAMA solution! Yes we have arrived at the unthinkable, a NAMA for Europe .this of course is just as bad if not even worse that our own Irish NAMA ,but with much worse consequences. All over the air waves to-day we hear that the Euro has been saved and the markets initial reaction is positive but the markets are prone to swing at a moment’s notice and I would not put faith in any initial reaction.

Where are all these billions going to come from and what is the Irish government’s contribution going to be now ,from my estimates we could be asked to stump up 5,000.000.000 billion. (Under the loan package, euro-area governments pledged 440 billion euros in loans or guarantees, with 60 billion euros more in loans from the EU’s budget and as much as 250 billion euros from the International Monetary Fund.)

Where are we going to get this kind of money? Am I the only party pooper?

Surely spending this sort of money replicates the reckless actions that got us here in the first place!

Someone somewhere is going to ask the question what are we going to have to do the get this money? Give up more sovereignty, in the form of a new Lisbon 3 referendum.

Either way this is not good news and this will dawn on the people of Europe in the coming months!

Just think if NAMA is bad for Ireland ,then Euro NAMA cannot be good for Europe !

Unless the Germans start to experience real pain, and their economy starts to go into depression ,and they then come on to the streets, I expect that things will die down and we will see perhaps new attention been brought on to the dollar again! Why? Because the Americans are much further down the road with their printing presses, and the American Jumbo Debt comes to focus on the world stage again!

The thing about debt is that it has to be faced up to at some stage !


 

 

Lies and dam Lies from Brian Lenihan!

Quotes from Brian Lenihan since the bank guarantee:

Source http://www.thestory.ie


photo Machholz

On Breakfast with Newstalk, April 26 2010.

First of all, that’s the position in 2009, Eurostat hasn’t decided it yet, that’s our assesment of how they will decide it, we’ll still argue the toss with them. We have to deal with 2010 yet, but let’s assume that you’re right for a minute and that all the €8bn has to be added on in 2010. Let’s assume that. We won’t be borrowing the money, we’ll be borrowing the money over a period of ten or fifteen years. We’ll actually be up fronting – in accountancy terms – the figure, but we will not in fact be borrowing… – April 26 2010.

Also on Breakfast with Newstalk

Now that I’m the shareholder in Irish Nationwide I will clearly ensure that whatever money is owed by Mr Fingleton is paid by Mr Fingleton. – April 26 2010.

Also on Breakfast with Newstalk

BL: No, no, listen, listen. This not good for the country , and it’s inaccurate. If next year we’re obliged to include the €8bn, the €8bn will not actually be borrowed next year the device of the promissory note means we borrow…

Ivan Yates: No, I know the promissory note is over ten years. You’re missing the point…

BL: No you’re missing the point! This is an accounting device! This is not real borrowing! What the markets look at is real borrowing. Not accountancy devices… – April 26 2010.

Speaking to media…

“The decisive and bold steps we have taken are not popular; and the honest and full disclosure by the Government and its agencies of the appalling mess we have uncovered within our banks has shocked the nation,” Mr Lenihan told the Dail.  “But I do believe that there is recognition among the citizens that the measures we have taken are necessary. And I believe the work of NAMA in cleaning up the banks’ balance sheets and forcing them and their borrowers to face up to their losses is winning the respect of the public.” – April 21 2010,  Irish Independent

“One of the good things about the steep discount, averaging 47 per cent, is that the residential property market will now be stabilised at a realistic level… You can now buy in confidence that the price is realistic.” – April 4 2010, Irish Independent

[Submitted by CO’D]:

The Financial Regulator has advised that all the financial institutions in Ireland will continue to be subject to normal ongoing  regulatory requirements. This very important initiative by the Government is designed to safeguard the Irish financial system and to remedy a serious disturbance in the economy caused by the recent turmoil in the international financial markets. As far as the question of ‘moral hazard’ is concerned, it will be a priority for the Government to ensure that the highest regulatory standards and standards of corporate governance apply in all of the institutions concerned including in relation to lending practices to safeguard the interests of taxpayers against any risk of financial loss. – Department of Finance statement, September 30 2008

[Submitted by CO’D]: During Dáil debate on credit institutions and financial support,

Olivia Mitchell (FG): We need to see the terms and conditions to know what will happen with regard to these people. Is there any requirement for the banks to restructure their loans? Will they be allowed to make a massive number of repossessions and have fire sales, driving house prices down further and sending the economy into even deeper recession? Has the Government any plan to deal with this?

Brian Lenihan: This is the plan.

Olivia Mitchell: […] However, we need a return to the banks of old — to the image we had of them as being dull, staid, boring, cautious and careful. We no longer have that image. What is the Government’s plan to create the conditions that will ensure this happens? What will happen to restore confidence in the banking system? If we do not restore confidence in the banking system, what the Minister is doing now——. I do not know what the Minister is laughing at.

Brian Lenihan: I am not laughing. I am allowed to smile. – October 1 2008

[Submitted by DC]: As reported by Simon Carswell in The Irish Times…

MINISTER FOR Finance Brian Lenihan has said the bank guarantee scheme was “a necessary first step” and “the cheapest bailout in the world so far”.

Mr Lenihan said the guarantee was “the cheapest bailout” compared with bank rescues in other countries, including the UK and the US, where “billions and billions of taxpayers’ money are being poured into financial institutions” – October 24 2008

Irish Times…

“We are not rushing into the banks without knowing precisely what the position is in those banks” – Nov 20 2008

During the Stabilisation of Public Finances debate, Dáil Eireann

In the context of any capitalisation the due diligence exercise will yield further information to enable us to do a far more precise identification of risk before we formulate policy on it. I would be reluctant to commit the taxpayer on any issue connected with risk without a full and definitive assessment of the risk in the institutions themselves and we must await this assessment. – Feb 5 2009

Following the publication of Anglo Irish Bank’s 2009 results. Minister Lenihan said he welcomed the increased scrutiny of Anglo as an opportunity to bring openness to the bank…

“which will ultimately allow us to draw a line under past activities”. “It is an opportunity for Anglo to employ a fully transparent approach to addressing the inappropriate activities that took place at the bank and provide comprehensive details to all stakeholders who deal with Anglo and who deal with Irish financial institutions generally.” – Irish Independent, Feb 21 2009

When challenged as to why he was not nationalising banks (at this time the State had already nationalised Anglo Irish Bank and taken a 25 per cent stake in Bank of Ireland and AIB).

“I do really want to scotch the idea that there are huge risks to the taxpayer in the valuation process because we are not nationalising these institutions.” – Irish Times,
May 18 2009

Nama Bill, Dáil Eireann.

NAMA will ensure that credit flows again to viable businesses and households by cleansing the balance sheets of Irish banks. This is essential for economic recovery and the generation of employment. It will ensure that we avoid the Japanese outcome of zombie banks that are just ticking over and not making a vibrant contribution to economic growth. – Sept 16 2009

Nama Bill, Dáil Eireann.

I am not prepared to contemplate the establishment of an entity that has no responsibility or accountability to this House. – Sept 16 2009

Nama Bill, Dáil Eireann

Nothing in the NAMA legislation will result in more repossessions of family homes. – October 14 2009

On the nationalisation of Anglo, during a debate on banking regulation in the Dáil

This decisive step was taken to safeguard the interest of the depositors of Anglo Irish Bank and the stability of the economy. I want to assure the House that this decisive step was taken to ensure the new nationalised bank will collect all debts due from persons who owe moneys to the institution. – Feb 18 2009

In response to written question from Kathleen Lynch

Taking account of the advice received the Government has proceeded with a comprehensive recapitalisation of Ireland’s two main banks and with the nationalisation of Anglo Irish Bank. The Government is also in discussions with the other covered institutions, Irish Life & Permanent, Educational Building Society and Irish National Building Society concerning their respective positions. – Feb 18 2009

In response to a written question from Arthur Morgan

The recapitalised banks have reconfirmed their commitment to an extensive credit package which will help to increase lending capacity to small and medium enterprises by 10% and to provide an additional 30% capacity for lending to first time buyers in 2009. The credit package also provides for a €100m environmental and clean energy innovation fund to be established by each bank. All the steps that I have outlined have been taken by the Government to ensure that the public interest is secured so that the financial system in Ireland meets the everyday financial needs of individuals, businesses and the overall economy. – March 26 2009

Written answer to Arthur Morgan

Our approach will facilitate a sustained flow of credit on a commercial basis to individuals, households and businesses in the real economy. – July 8 2009

When questioned on the delays in implementing Nama legislation on Morning Ireland

“We can’t have a lawyers’ bonanza and that is another good reason why we have to get this right.” – May 18 2009

Kicker; written answer to Joan Burton

Arthur Cox solicitors have been engaged by my Department since September 2008 to provide advice in relation to general banking matters including the Bank Guarantee scheme, the nationalisation of Anglo Irish Bank and the recapitalisation of AIB, Bank of Ireland and Anglo Irish Bank. The company was paid €1,628,024 in 2008 and €2,254,263 has been paid to date in 2009. The sum of €5.4 million has been allocated for legal advice for 2009 and an estimate of €3 million has been set aside for legal advice in 2010.

PriceWaterhouseCoopers was retained by the Financial Regulator in late 2008 to assist the Financial Regulator with a review of the financial and capital positions of Irish banks and to enable the Financial Regulator to advise the Government on what action needed to be taken. The work undertaken involved an initial high level assessment of the capital and liquidity levels of the institutions, stress testing of the institution’s loan portfolios over a three year period, and review the valuation of properties held as collateral against the main property loans.

The total fees paid by the Financial Regulator to the company in respect of the work was €3.8 million, which has been completed. In addition, the Financial Regulator has paid €0.84 million to Jones Lang La Salle for financial and property consultancy services in relation to the Bank Guarantee Scheme.

The National Treasury Management Agency paid a total of €7.3 million to Merrill Lynch for investment banking advice up to 30 June 2009. Following a competitive tender process in July, Rothschild have now been awarded the contract for investment banking advice. The NTMA has also retained an economist however the terms of his contract with the NTMA were agreed on a confidential basis. In addition, following a competitive tender process, the NTMA engaged HSBC and Arthur Cox to provide advice in relation to NAMA. – Sept 22 2009


NOTE: I’ve gone through the Dáil record and archives of the Times and Indo, but haven’t listened to radio or TV interviews. If anyone has a bit of time to go back and listen to a Morning Ireland/Prime Time/The Last Word/Whatever interview… t’would be useful.

* a word members of our Government like to use when scripting excuses for the negative outcomes that result from badly implemented policy or regulation. Usually follows “unforeseen”.

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