Irish bank shows the way
SizeaBle city floats have been a rare event in recent times, so the return of allied irish Banks (AIB) to the public markets is something to be hailed.
it shows that, despite all the hype about banks fleeing london post-Brexit, this eurozone bank is heading in the opposite direction with a dual Dublin-london listing.
The offer should also be closely watched in Whitehall since it shows that, with determination, even banks most damaged by the financial crisis can be resuscitated and freed from public ownership.
AIB was rescued with €20.8bn (£18.1bn) of irish taxpayer funds in 2008. Based on a current book value of just over €11bn (£9.6bn), the irish authorities are hoping to raise at least €3bn (£2.6bn) from the sale.
Now the irish economy is again the fastest growing in the eurozone, the ruling coalition in Dublin clearly feels it is worth the taxpayer taking an initial loss if it can get AIB off its books. in this it is following the United states, which started selling financial insurer AIG at a loss in the belief that taxpayers would recoup their investment.
The big contrast is with Royal Bank of scotland. successive timid governments have been reluctant to return RBs to the markets at a loss.
instead they have micro-managed from the Treasury, hindering rather than helping the bank’s recovery. RBs finds itself bogged down in entrenched warfare with private shareholders, the Us Justice Department, the EU and assorted critics, leaving it constrained from firing up on all cylinders.
it now also faces the ghastly prospect of falling into the hands of a Jeremy corbyn-led government committed to turning RBs into some kind of Venezuelan-style state lender.
much of the dross which is on the books of the irish lenders was transferred to its ‘bad bank’, the National asset management agency. This helped to speed a recovery and AIB has been profitable in two out of the past three years and pays a dividend.
Buying AIB shares would in effect be a play on the health of the irish economy since it has a leading market share of 36pc in the home loans market.
The bank has a healthy amount of capital but is still burdened by the fact that 14pc of its loans are non-performing. That is a high proportion by lloyds Bank standards but makes AIB an absolute paragon when compared with the italian banks.
JP morgan may be moving jobs to Dublin but AIB has its sights in the opposite direction. Britain is ireland’s most important trading partner. Dublin cannot afford to be anything but an advocate of an after-Brexit relationship which produces least friction.
Confidence boost
THERE is no escaping the fact that Britain’s expansion slowed in the first quarter. all the signs are that despite the uncertainty engendered by the general election campaign, consumers – the driving force behind the UK’s resilience – are upbeat.
against all expectations, the GFK consumer confidence index rose in may showing that the squeeze on household incomes is more in the mind’s eye of Tory and Brexit critics than the citizens. Just to underline that, households still feel confident enough to embark on major purchases.
indeed, the latest credit figures can be read in two ways. Unsecured lending came in in april at £1.5bn and has been growing at an intoxicating pace of 10.3pc.
That will be a prudential worry for the Bank of england along with the popularity of private contract purchases in the car market. The other side of the coin is that households remain confident enough to borrow and spend despite much trumpeted worries about Brexit.
This is not that surprising given unemployment is so low. While there may be people feeling squeezed, in aggregate they are not unduly concerned about losing their jobs and incomes falling off a cliff edge.
clearly, the build-up of credit must be closely monitored. But loans and leverage also fuel output.
Dixons tie-up
Tesco has its hands more than full at present with an ongoing fraud trial of former executives and the competition probe into the bid for food wholesaler Booker.
Nevertheless, the decision to experiment with Dixons carphone outlets in some bigger stores is worth watching. isn’t this how sainsbury’s courtship of argos began?
From small beginnings…