After months of talk about triggers being pulled and buttons being pushed, Minister for Finance Michael Noonan finally did the deed this week and signalled the Government's intention to float AIB on the stock markets next month.
It marked Noonan’s last major act in office as he prepares to follow Taoiseach Enda Kenny out of Government next week. He called the move a “significant milestone’’ for the Irish banking sector.
The sale of an initial 25 per cent stake in AIB, which was rescued by the taxpayer to the tune of €20.8 billion during the financial crisis, could raise up to €3 billion for the State.
The announcement marked the beginning of a four-week process before shares are listed on the main Dublin and London markets in what will be the biggest initial public offering (IPO) in Europe so far this year.
So, now begins the process of wooing investors. AIB chief executive Bernard Byrne said the focus would be on demonstrating how the bank has turned itself around since the crash, slashing its bad loan book from €29 billion to €8.6 billion.
It doesn’t stop there, though. AIB is to tell potential investors that the remaining bad loans will be mostly fixed within three years – but the manner in which it goes about achieving that could be problematic for the Government.
The bank’s solution could include the sale of some loans to overseas buyers of distressed debt. This would most likely result in a greater level of repossessions against borrowers who refuse to engage with the bank.
To make matters worse, the Government also has to get the public to swallow the fact that the €3 billion it hopes to raise from the sale cannot be invested in public services without breaking the EU’s fiscal rules. Instead the cash is supposed to be put towards reducing the national debt.
Separately, AIB signed an agreement with Green Reit to lease an office building at Central Park in Leopardstown, Dublin 18. The bank is to move more than 500 support staff to the premises, where it will establish a “centre of excellence” in customer digital innovation.
Nama profits
Another legacy of the economic crisis is National Asset Management Agency (Nama), which was set up as a bad bank to take nonperforming loans off the balance sheets of the State's banks.
This week it published its annual report for 2016, which showed it expects to generate a lifetime profit of €3 billion when it finishes its work by the end of the decade. The report showed the agency generated €5.4 billion in cash and a profit of €1.5 billion last year.
On housing the report showed that, since 2011, Nama and its clients have sold sites with the potential to hold up to 50,000 homes. Just 1,116 houses have been built on those sites, however, while work has started on a further 2,104.
It was in that context that Michael Noonan said landowners who hoard sites that could be used for house-building will have to pay a financial penalty from next year.
There is an issue with investors sitting on empty development sites so they can earn a greater profit as property prices rise. Noonan said the Government will introduce a levy on vacant sites "in the context of next year's budget".
This is designed to force such owners to sell the land so it can be used to build much-needed houses. “People who are sitting on land as an asset will find themselves sitting on a tax liability,” he said.
Indeed, David Ehrlich, chief executive of Ires Reit, the State's largest private owner of apartments, said many private equity firms that snapped up land during the financial crisis are "just sitting on sites" and unprepared to sell.
However, he said Ires Reit was "not a vulture fund", and is in talks to acquire land to build duplex townhouses to take advantage of rising demand for homes in the city.
Speaking after its annual general meeting, Ehrlich said he was “actively looking at sites” both inside and outside the M50 motorway in Dublin.
Separately, the National Competitiveness Council warned that the State's housing crisis is having an adverse effect on the entire economy, pushing up wages, threatening inward investment and limiting firms from expanding.
Good job news
There was a raft of jobs announcements, with accounting firm Grant Thornton among them as it announced plans to create 250 new posts over the next 18 months, mostly at a newly established centre of excellence connected with compliance reporting.
On the same day, 430 jobs were announced by drugs company MSD and outdoors retailer Regatta. APC, a Dublin-based firm that works with pharmaceutical companies, announced a major expansion at its headquarters that will double its headcount.
The latest figures for the Live Register showed an additional 2,200 coming off the register in May, which brought it to its lowest number since October 2008, the Central Statistics Office said.
The Government will be hoping to bring the numbers down further, and it unveiled plans for a €60 million regional enterprise development fund geared towards creating jobs outside Dublin.
Meanwhile, the conditions in the State for creating jobs were in the spotlight, as the Republic was ranked sixth in the world competitiveness rankings. That was its second-highest ever placing.
The survey of 63 countries, compiled by the IMD business school in Lausanne, Switzerland, linked our rise in the rankings to the State’s recent economic performance; the ongoing level of inward investment and a “high level” of business efficiency.
The Republic came third when it came to the performance of the domestic economy. It was also ranked third overall for attracting international investment. It was top for business productivity and efficiency; and third again for “positive business attitudes”.
However, it came down the list in the categories of employment, which includes labour-market flexibility, infrastructure and access to finance.
Bad banking
Let’s hope nobody tells them about out banks though, with yet another hefty fine dished out by the Central Bank for breaches to laws aimed at countering money laundering and terrorist financing.
This time it was Bank of Ireland in the dock. It was fined €3.15 million for, among other things, the failure to report six suspicious transactions to the Garda and Revenue Commissioners promptly.
This was the second-largest penalty issued by the Central Bank in relation to the Criminal Justice (Money Laundering & Terrorist Financing) Act 2010. Ulster Bank was fined €3.325 million last November and AIB was ordered last month to pay €2.275 million for similar violations.
Ryanair flying high
In company news, Ryanair published results that showed it grew profits after tax by 6 per cent to €1.316 billion in the 12 months to March 31st. The airline also announced plans to return €600 million to investors through a share buy-back scheme.
Furthermore, Ryanair said it would offer Alitalia a deal that would see it effectively take over the bankrupt Italian carrier's short-haul business while also selling its long-haul flights on its website.
Separately, Applegreen, the petrol forecourt retailer, is in talks with up to three parties about opportunities to expand its presence in the US market.
