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EVEN BY ITS own lofty standards, the degree of upheaval in the Irish retail bank sector over the past 12 months has been remarkable.
Headlines about branch closures, job cuts and market exits have almost become run of the mill.
So yesterday, when the Department of Finance announced plans to sell at least some of the State’s remaining 13.9% stake in Bank of Ireland (BoI) over the next six months, it almost felt a little quaint.
But there’s no doubting the significance of the announcement, both for banking in Ireland and from a historic perspective.
The question on everyone’s lips is why now?
“The main and only reason that we are doing this… is because I’m very confident about the future of the Irish economy,” Finance Minister Paschal Donohoe told Newstalk yesterday.
That’s certainly part of the story.
‘Throttled’
Almost exactly a year ago, Donohoe said that he expected Irish taxpayers to retain their bailout-era shareholding in BoI, AIB and Permanent TSB for “a number of years to come”.
With the economy — and the banks’ share prices — being throttled by the uncertainty of the pandemic at the time, there was a distinct sense that the government had missed its window to ditch its stake.
But if a year is a long time in politics, it’s practically a geological age in banking at the moment.
In June of last year, BoI shares were being sold at around €2.05, close to a four-year low. This was about a month after the Francesca McDonagh-headed lender published interim results showing a €21 million loss for the first quarter after the bank set aside €421 million to deal with a potential wave of Covid-linked loan defaults.
In total, the bank would set aside €1.1 billion for this purpose, driving it into a €374 million loss in the first year of the pandemic.
But BoI returned to profitability in the second half of 2020 and has had a strong start to the year, posting better than expected numbers in its first-quarter trading update, published in April.
Another important factor in BoI’s improving fortunes is the impending exits of Ulster Bank and KBC Bank from the Irish market, announced earlier this year.
BoI is in talks with KBC Bank about acquiring the Belgian lender’s deposits and its €9 billion loan book.
If the deal is completed and receives regulatory approval, Ireland’s mortgage lending market — already bedevilled by a lack of competition — will effectively become a two-horse race between BoI and AIB.
And so it’s only natural that investors have taken a more positive of the bank’s shares in recent weeks.
Just 12 months on from Donohoe’s remarks, BoI’s share price had more than doubled to €4.60 at the end of trading on Tuesday, the eve of the minister’s big announcement.
Speaking to reporters yesterday, Donohoe roundly denied that the KBC negotiations or Ulster Bank’s exit had anything to do with his decision to begin the process now.
However, he said, “it wouldn’t be credible” for him to deny that a deal would impact the value of Irish bank shares given how they have changed the “competitive dynamic” in Irish banking.
Pointing upwards
With the economy reopening and forecast by the ESRI and others to largely shrug off the impact of the pandemic by 2023, all the arrows are pointing upwards for the bank’s share price (in theory, at least).
Nevertheless, it’s easy to see why eyebrows have been raised by the timing of the announcement — even at around €4.60, BoI’s share price is still heavily depressed compared with where it was in 2018.
At the beginning of that year, BoI shares were trading around the €8 mark before a broad slump in European bank stocks began to take hold from which many of the biggest players are yet to fully recover.
“The value of her shareholding [in BoI] back in 2017 was €1.1 billion,” Sinn Féin finance spokesperson Pearse Doherty told the RTÉ News at One yesterday.
“Today it’s valued at somewhere in the region of €650 million. That’s nearly half a billion euro of a reduction. So there is a serious question as to why the minister has decided that the time is right, given that we are seeing a recovery in the share price, they have doubled in the last year.
“It would be envisaged that as we come out of the pandemic as we see more economic recovery, there that the bank share prices would increase in value.”
For Donohoe, this is exactly the point.
From where he’s standing, it’s impossible to divine where bank share prices will be in the next 12 months.
In the short to medium term, however, improvements are expected as lending and general business levels ramp up again in line with the reopening of the economy.
If BoI manages to close the KBC deal and emerge victorious in its scramble for Davy Stockbrokers, the bank’s share price could be in for a further lift in the coming weeks and months.
‘Rapid pace
Donohoe’s plan is for the shares to be drip-fed to the market over a six-month period on behalf of the State by Citigroup.
An undisclosed price floor will be set under which the shares will not be sold.
“The number of shares sold will depend on market conditions, amongst other factors,” the department said in a statement.
In other words, the plug can be pulled if the price dips significantly, “in order to ensure that the taxpayers’ interest is protected”.
Even still, it’s not hard to find objections to Donohoe’s gamble or the political principles underpinning it.
The Financial Services Union has queried the decision, coming as it has after 12 months of huge upheaval for the sector.
“In the last couple of weeks, the Minister for Finance and the Taoiseach have both publicly commented on the need for a review of banking in Ireland,” said FSU General Secretary John O’Connell in a statement.
“Change is taking place in the sector at a rapid pace and there is common agreement that a strategic discussion needs to happen involving all stakeholders on the future of Banking in Ireland.
“The sale of the state shareholding in Bank of Ireland should have been part of that discussion and not taken prior to that review taking place.”
On the opposition benches, there is no shortage of TDs who believe that divesting from the banks in general — a long-time goal for Donohoe and his Fine Gael party colleagues — is a bad idea, particularly in the midst of a housing crisis.
Given the Ulster and KBC exits and their implications for competition in the mortgage market, calls have ramped up in recent months for the government to use its existing shareholdings to create a ‘third force’ in the sector.
Tánaiste Leo Varadkar even agreed with the idea in principle in February and said it’s something he wants to “explore”.
In this context, Labour Party finance spokesperson Ged Nash described the BoI sale as “short-sighted”.
Solidarity-People Before Profit TD Mick Barry, meanwhile, told RTÉ’s Morning Ireland programme that State-owned banks are needed “so that there can be cheap loans and mortgages” to tackle the housing issue.
Naturally, there is little appetite for this in the government at the moment given its party political make-up.
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I think I’d honestly rather have Trump as president than this nutjob.
He’s a well respected lawyer and has brought some useful bills to fruition in his time and got them over the line. He passed through Princeton and Harvard Law too. Seems the evangelicals came out in big numbers and got him over the line.From what I’ve seen of him his religious credentials seem to be all about votes. You’ll recall John McCain becoming a baptist in his republican race, Trump too went off to Church last week.
McCain believed in evolution, this wack job does not. Ergo Moron.
The fact that anyone who doesn’t believe in hard scientific facts can still be taking seriously as a leader by millions of people is testament to the wide-scale ignorance under which many people still live.
In 2016…terrifying.
You’re quite right Fozz. It is indeed the current year.
He absolutely believes in evolution. He just says he doesn’t to appeal to the people who don’t. Every word that comes out of any of theses guys mouths is a lie to get elected. That’s much worse than ignorance.
@the bull
Agreed but so does every politician, which ever colour, in the world
Of the 44 American presidents since the civil war, none have claimed to be president. Strange really when the Pew Religious Landscape survey reported that as of 2014, 22.8% of the U.S. population is religiously unaffiliated, atheists made up 3.1% and agnostics made up 4% of the U.S. population. So 30% of the general population are non – religious. So that’s generally means that almost 1 in 3 American presidents have lied about their beliefs.
That should read “None have claimed to be atheist”. Apologies.
I would never trust a politician who was being backed and financed by a large Corporate interest or lobby. This only makes that politician beholden to them at the expense of the people they are meant to represent. If I was an American citizen I’d investigate which candidate(s) has been bought by a Corporate interest or lobby and not vote them. All you are getting is more of the same – a puppet president not serving the peoples interests. Trump is far from perfect but he has entirely financed his own campaign and I believe that he genuinely puts the considerations of the American people before any corporation or lobby.
Ha ha , now that trump is gone , media are branding cruz as the new nutjob .. you would swear Clinton was the virgin Mary herself
Trump is not gone yet. Please understand the subject before commenting.
I think Reagan lost Iowa too – there is a long way to go yet.
Cruz was ALWAYS branded a nutjob, and a very dangerous one at that ..
Great just what America needs an evangelical nut
I wouldn’t worry about it. The GOP establishment have decided Rubio is their man in the same way Dem establishment have ‘Hill dog’ as their preferred candidate, and given Microsoft are doing the tallying of votes at these caucuses and the company has donated tens of thousands to both of those candidates, I reckon they’ll be running by hook or by crook.
Rubio and Clinton are the same on just about all major issues, particularly foreign intervention, the TPP and immigration. The issues on which they do disagree are cosmetic and of no concern to establishment elites (the likes of the Koch brothers, Goldman Sachs or Hillary’s foreign donors) and amount to shuffling of the deck chairs on the Titanic in the grand scheme of things. Expect media like Buzzfeed, the Guardian, and NRO to put an undue amount of focus on ridiculous and frankly inconsequential topics such as transgender bathrooms, playing up the minor differences to draw attention from their glaring similarities.
In the mean time, expect more idiotic articles about things such as the “BernieBros” as the media attacks any candidate their corporate paymasters may not be able to 100% control.
Enjoy your “choice” America.
It’s really really annoying when people don’t do what you tell them
I didn’t know that -surely thats a conflict of interest? Microsoft is one of Cruz’biggest donors yet got to do the counting!
The Hillary stories are worse. The counts for her vs. Bernie went to coin flips in six different places, and Hillary just happened to win all six. This is beyond a joke.
With what happened to the left wing government in Greece last year, where there was an attempt to stop them holding a referendum as it would be ‘undemocratic’, and what’s happening to the right wing Law and Justice government in Poland, with the EU taking steps to suspend their right to vote in laws and take direct control, I hope people will start to realise it doesn’t matter if you’re “right” or “left”. If you dare to vote outside the narrow postage stamp of ‘Officially Approved Ideologies’(tm), you’re going to get screwed, or your campaign will be snuffed out before it gets off the ground.
It’s not such a new thing to suggest democracy is dead, but I think the real power-brokers have just decided to stop playing ‘Weekend At Bernie’s’ with the corpse.
I’m confused if he was born in Calgary how is he eligible exactly? I thought you had to be born in the US or is an american mother enough?
There are still questions over his eligibility to run. His parents’ nationality and the fact that they voted in Canadian elections around the time of Cruz’s birth calls into question his eligibility. It’s all very confusing. And the least worrying thing about Cruz. He’s a nasty little man.
His mother is a US citizen, he was therefore entitled to citizenship.But of course if he is on target to become President there will be a challenge.
Same here john, I am really confused that a Canadian born Cuban-American is running for the president of America and one of his main platforms is anti emigration. I thought you had to be born in the USA to run for president.
He had dual citizenship at one point. Canada and US, so he renounced his Canadian citizenship.
Good point John. That whole ‘you had to be born in one of the 50 states’ was a big thing in the so-called birther movement against Obama. Having an American mam wasn’t enough for those people objecting to Obama, even though it was proven that he was born in the 50 states. But now it’s ok for Cruz cause we KNOW he wasn’t born in the states, but because his mam is American?
the rules state you must be born of the land to run for president. There’s legal challenges to his candidacy which he is keeping under wraps for the moment it seems.
You have to be a ‘natural born’ citizen to run for prez. Opinions differ, but majority of legal eagles agree that as he was a citizen at the time of his birth ( his mother is from U.S. ), he’s qualified, regardless of where he was born.
The criteria isn’t being what they call a natural born US citizen, rather than just a US citizen. The government cleared natural born citizens born in other territories when John McCain (born in the Panama Canal Zone) was questioned and the senate validated his run. Cruz qualifies under the same criteria. We’re not as fussy, as some Americans (i.e. Martin O’Malley) qualify for Irish Citizenship and can run for president here.
The gotcha could most likely be the “natural born citizen” requirement. Most legal scholars agree that means born in the United States. Cruz is arguing that simply being born anywhere with a legal entitlement to citizenship is enough. If it’s challenged, I don’t think he would win.
Rick Santorum and Mike Huckabee were the last two winnners of the Republican nomination in Ohio, neither of whom went on to be the nominee for President. Ohio tends to pick the most religious nutter. Despite how the media is trying to spin it, this is not a setback for Trump. He’s going to do a lot better in New Hampshire.
Agree I think trump will win new Hampshire and north Carolina but I think the fact Rubio came a reasonably close third could be significant.
Rubio is who the Democrats fear most and for that reason I believe he will be the candidate
Iowa??
What has Ohio got to do with this?
whoops..Iowa of course…ye knew what i meant!
@ P.J
Agreed, Cruz will likely fall off the way Santorum did in the last campaign. It will likely be a Trump vs Rubio contest. The “establishment” will get behind Rubio now, so will be interesting to see if that’s enough to beat Trump.
If it does come down to trump and Rubio the Establishment’ as you put will be between a rock and a hard place. Do they support Rubio to beat trump but what if he runs as an independent?
The shock here isn’t the support that Cruz got. That was around the level expected. The real story is the amount of supporters that seemed to shift from Trump to Rubio. As you said, the Iowa support tends to go to ‘Mr. God and Jesus’ which isn’t really Rubio’s game.
I think Trump has already publicly stated that he won’t run as an independent if he doesn’t get the nomination…would be hard for him to roll back on that.
Trump has probably gone to far in this primary race to turn around and go independent now
Trump will roll back on anything. He flip flops on plenty of issues almost weekly. At one stage he was non interventionist, then he wanted to ‘bomb the sh*t out of’ people and ‘kill their families’.
If he was to declare open war on the GOP establishment and run independent his supporters would be ecstatic. They’d rather kill the ‘RINO’ or more distastefully ‘cuckservative’ campaign and have another shot at the primaries in 2020 than see Rubio or Cruz win. Remember if the GOP gets the White House, that man will be running again in four years. That wouldn’t suit Trump at all.
@scewmadd
Now I thought I was cynical!
But I’m not saying that you are completely wrong
“Mark my word, if and when these preachers get control of the [Republican] party, and they’re sure trying to do so, it’s going to be a terrible damn problem. Frankly, these people frighten me. Politics and governing demand compromise. But these Christians believe they are acting in the name of God, so they can’t and won’t compromise. I know, I’ve tried to deal with them.” -Barry M.Goldweather ,1994.
Be afraid,be very afraid.
#FeelTheBern
#HashtagsAreForTwitter
“I will carpet bomb Isis until the sand glows”
Gospel according to Ted
Trump is not a nutjob. He is very dangerous and while I disagree with almost everything he has to say there is some sense to his extremist views. Cruz, on the other hand, is a complete nutcase.
Hillary v Sanders ……six coin tosses to decide in six areas and Killary won all six……lol…..democracy ? You got to be kidding me….
I live in Alberta 5 months a year and although a Trump fan myself I can assert with all honesty that I haven’t heard a god word about Cruz or a bad word about Trump. Everybody is mystified by yesterday’s Iowa vote.We fully ecpected Trump to win. Cruz wouldn’t have a hope in hell here in Alberta if……..
What does Alberta, Canada have to do with a United States election?
@Mr Hoffman……………..100,000 US citizens live in Calgary.
You must’ve misunderstood his question.
@Guybrush Threepwood……..I ought to have given some background to my original comment. Albertans in general, and Calgarians in particular, are quite like Americans and have in the past considered joining the US. So Cruz having connections to Calgary,Alberta one would imagine strong or some support for him in Alberta. I have not heard any favourable comments for Cruz but Trump definitely turns Albertans on. Too bad about Iowa.
BTW Americans,unlike Irish, can vote in US elections.
A right wing nut job won’t get elected so if the Republicians pick one they’re phucked. Having said that, it’s great to see that the Donald got some feathers pulled in Iowa. He’s gonna be totally plucked in a few weeks. Quack, quack, quackery quackers!
But what if the Democrats pick a socialist?
Rubio the most likely – obvious if you look hard enough.
have your say