Inside the world of business
The third force in Irish banking may yet be with us
HAVING FADING from the spotlight in recent months, the mooted prospect of a so-called third force in Irish banking is firmly back in the picture.
The setting of a deadline of July 2nd by the EBS for prospective offers for the building society is indicative of the urgency now behind the project.
The Department of Finance said yesterday that “every effort is being made to progress talks on private investment which would reduce the need for further State investment”.
Yesterday, the State committed to injecting a further €250 million into the building society through a promissory note, and again confirmed that, if private capital is not forthcoming, it will meet the further minimal capital requirements as set by the Financial Regulator.
As the requirement is €875 million, this is a hefty promise. It is thus hardly surprising that the Government wants to bring some finality to the “third force” issue that has been meandering for too long.
Mixed messages have been coming from the EBS about its future over the last few months. The talks with the Cardinal Asset Management-led consortium appear to have gone adrift, with analysts privately expressing doubts about whether the group ever had the necessary funds realistically to recapitalise the building society.
All this is good news for Irish Life & Permanent, which is looking increasingly likely to form the backbone of the “third force”, something that the bank and pensions group has long supported.
It’s far from a straightforward amalgamation, however. IL&P may boast the accolade of being the only Irish financial institution not in receipt of State aid through Nama, but it’s far from being the golden boy of Irish banking. Major worries remain about its funding position. A note from Deutsche Bank yesterday expressed particular concern about IL&P’s net interest margin.
As the respective futures of EBS and IL&P look set to become clearer in the coming weeks and months, neither institution can be said to be a winner if some form of merger does emerge. The reality is both institutions need each other.
A welcome volte-face
THE OFFER by Paul Donovan to allow his rivals participate in the trial of ultra-fast broadband is a welcome volte-face by Eircom, now owned by Singapore’s STT.
Under a variety of previous owners the incumbent has doggedly fought a rearguard action against efforts by the regulator to make it open up its network to competitors.
To a certain extent Eircom is merely making a virtue of necessity. As Donovan concedes there is no point even contemplating building a €2.5 billion next-generation broadband network in Ireland unless you have all the players in the €4 billion a year industry committed to using it.
It will be interesting to see how Donovan’s competitors respond to his offer and whether they can work together.
That in itself will be a test of whether it is actually feasible for them to all share the network should it be built.
And if they can’t, then it’s not worth seeking the answer to the next question – where will the money come from?
In happier times the State might have been expected to shoulder some of the costs, but Donovan refused to be drawn on whether Eircom would be looking for taxpayers’ money.
If, however, Donovan and his industry peers can demonstrate the ability to work together, then the case for Government investment in such a critical piece of infrastructure can still be made, despite the bleak economic back drop.
Plan B for Glanbia?
THOSE WHO believe there was no Plan B when the Glanbia co-operative failed to buy out the Irish operations of Glanbia plc some weeks ago could eventually be proven wrong – but not quite yet.
There was a move at the co-operative’s poorly attended agm last week to revisit the multimillion-euro deal but a motion was not voted on because the wording was in conflict with co-operative rules.
The motion had been put to the members-only meeting by the Barrowvale region representative and discussed for a short time. The problem was that the wording instructing the co-op management to pursue further the sale was not in order.
However, a postmortem on the events leading up to the sale, which saw the defeat of the bid by a mere 75 votes, is continuing with discussions between co-op management and its local representatives.
Insiders say the closeness of the vote – where 2,970 voted in favour and 1,097 against but the bid failed because a 75 per cent majority was needed – is keeping the issue alive.
Milk prices may have improved but the hunger of a significant portion of milk producers for ownership of the processing assets – and thus the ability to set prices – remains strong.
It is unlikely, however, that anything major will happen before the autumn when the harvest is over and the dust has settled. Somebody has to do the farming, after all.
Online
For regular commentary on business and economic issues visit our blog, Current Account, at www.irishtimes.com/blogs/business
Twitter users can receive links to the latest business news and blog posts by following us at twitter.com/IrishTimesBiz
Today
Considerable focus will fall on an EU summit in Brussels, where member states will consider tougher fiscal rules as well as the release of regulatory stress tests on individual banks . At home, ComReg is due to publish its latest quarterly telephony statistics.
Podcast
You can listen to our weekly business podcast at www.irishtimes.com/business/podcast
