Inside the world of business
Economic clouds may prove to have silver lining for IFG
IT’S NOT often that financial services companies have something to shout about, but pensions company IFG has been quietly carving an impressive performance over the last few years. The company’s divestment of its international division this year, has underlined its focus on its two core markets – the UK and Ireland, where it operates both pension administration and advisory services.
But while most investor attention has focused on IFG’s successful entry into the UK self-invested personal pension market through the acquisition of James Hay more than two years ago, which was transformational for the company, its Irish pensions business looks interesting at the moment.
While the company’s Irish division took a major hit from the collapse of the Irish property market, income from its core corporate pensions and individual advisory business, though still loss-making, grew by 6 per cent in 2011. The company added 36 new corporate accounts last year and has already signed up 27 new accounts this year.
Furthermore, the company looks well-positioned to capitalise on intended changes to the pensions market here.
The proposals by the Pensions Board, which will mean more onerous funding requirements on defined benefit schemes, may benefit providers of defined contribution schemes such as IFG, as companies consider shifting from defined benefit to defined contribution.
This is not to mention the extra advice that may be needed by perplexed employers or trustees as they weigh up options on existing defined-benefit schemes, something IFG’s advisory business may be able to mop up.
With Ibec and other groups pouring cold water on the Pensions Board’s new proposals, particularly what they will mean for employers, it’s good to know that someone may benefit from the proposed changes. As they say, every cloud . . .
Bank options for mortgage-holders in arrears still not transparent
IRELAND’S LEADING lenders came out yesterday to reassure customers that they were actively moving to address the problems of mortgage distress.
The flurry of releases would have impressed more if the banks had not been called before the Government’s economic management council to explain their actions, or possibly more appropriately the lack of them, in addressing mortgage arrears.
With the personal insolvency legislation due to be published tomorrow, the council – featuring Taoiseach Enda Kenny, Tánaiste Eamon Gilmore, Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin among others – was keen to impress of the banks the importance of a proactive stance on mortgage debt management.
The banks have been fighting hard to have mortgage debt excluded from the process but their foot-dragging on measures to alleviate the plight of people in genuine difficulties appears to have convinced the Government of the need to provide some access for mortgage-holders.
Yesterday, the banks were tripping over each other to assure customers of impending pilot schemes on everything from split and negative equity mortgages to interest-only periods and mortgage-to-rent schemes. Other options under consideration include long-term extensions to loans, equity participation and even voluntary sale-for-loss.
Permanent TSB, the State’s leading mortgage provider, made a virtue of the fact it had completed a “detailed segmentation of its mortgage book to increase visibility over the arrears situation”. What? Only now?
What was most noticeable was the number of times all the banks referred in their releases to pilot projects. More than three years into the financial crisis that most recently shows 78,000 mortgages more than three months in arrears, and with a total of 15.2 per cent of all mortgages either in arrears or restructured, it is well past time for the banks to be piloting what, for the most part, are not exactly revolutionary solutions in the mortgage market.
And while the number of restructured mortgages does indicate some interaction to date between lenders and their customers, there remains a worrying lack of transparency for customers over the options available to them should they find themselves in difficulty.
Rating action from a relative unknown
EVER HEARD of Egan-Jones rating? No? Neither had Cantillon until yesterday. And what better way for an obscure and niche ratings company to garner headlines than by downgrading Germany, the economy on whose health the rest of the euro zone now appears to rely.
Downgrading Germany one notch from AA- to A+, the US group said that whether Greece or others leave the euro zone, Germany will be left with “massive, additional, uncollectible receivables”.
It estimates Germany is owed €700 billion, of which only about half is collectable – and that does not include exposure of Germanys banks to troubled countries in the euro zone.
The call was hardly revelatory – even if runs counter to the triple-A rating for Germany of all the Big Three.
In many ways, it reflected what has already been posited by Der Spiegel and others – ie the choice for Germany is not whether it takes a major financial hit on the euro zone crisis but rather whether the cost of doing nothing is likely to be higher than the price of moving now to bail out weaker European states.
Markets were unmoved by the latest ratings action. To be fair, their failure to react sharply probably has less to do with the fact that they were asking “Egan who?” and more to do with markets having already priced in much of the bad news that has led Egan Jones to move.
The private US company may be relatively unheralded but it is building up a reputation for making bold calls, especially on euro zone debt.
Of possibly greater relevance is that it is not beholden to the industry it assesses. Egan Jones is paid not by those companies it rates but by those using the ratings. That doesn’t make it right in its judgment but it does suggest it deserves a hearing.
Quote of the day
I fear that at the summit we will talk too much about all these ideas for joint liability and too little about improved controls and structural measures. – Angela Merkel before today's gathering of heads of state and governments
TODAY
AIB agm: Expect some rancour over the proposed redundancies and closure of the defined benefit pension scheme
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