BrianODohert
Registered User
- Messages
- 9
The nay-sayers, including the G46 economists, seem to have gone quiet.
Is this because the Draft Business Plan and the EuroStat/SVP development finally made it clear that- far from having to borrow 54 bn or so to give to the banks, or to "bail out the banks", as various politicians and commentators used to declare- NAMA is actually a transfer of assets, valued somewhere between, say, 47bn and maybe twice that, from the banks and to the State, with repayment in the form of cash, let's hope, in some years time, at an interest rate of only 1.5%. This is a big benefit to the taxpayer in Ireland:
*the billions he borrows means he avoids having to borrow the same elsewhere, at an interest rate of c. 4.5%
*the interest rate differential, alone - 1.5% v. 4.5%- over the ten years is hard to estimate but probably worth €5 bn to the borrower, (and €10 bn interest opportunity cost to the banks' shareholders)
* if the asset sales do not completely fund the repayment/redemption commitment, then the banks will be hit for the shortfall (or the bonds will simply not be redeemed)
* if, as is more likely, a substantial profit is made on the sale of the assets, even after high management and advisory costs, all but c.2.5% will be retained by the State.
Its surely a no brainer for the State, and rather harsh on the 150,000 Irish small shareholders of the two main banks, who are now the majority owners of them, and who also have to pay out €560 million annually to the State (8% of preference share capital invested in AIB/BOI) AND 25% of their equity, for the privilege of a State guarantee. (I dont think shareholders of other banks in the EU, also in receipt of government guarantees and capital, have been treated so harshly). Also, the two main banks seem to have had to provide c. €6-8 bn (?) in funding to the State's bank, Anglo Irish...
The campaign against our two main banks - whose "sins" of over-optimism were minor compared to those of their competitors in the US/UK and elsewhere - has been very effective in keeping down the share prices, valuing both banks equal to or less than one years core earnings (!!) (EU banks are still trading at 15-20 times core earnings )..and perhaps setting them up for take over by some foreign banks seeking a juicy source of cheap (depositors) funds.
Do we really want our banking industry to come under foreign management? (We see now the foreign lenders pulling home their funds, under pressure from their own governments..is that not a lesson to us?)
Is this because the Draft Business Plan and the EuroStat/SVP development finally made it clear that- far from having to borrow 54 bn or so to give to the banks, or to "bail out the banks", as various politicians and commentators used to declare- NAMA is actually a transfer of assets, valued somewhere between, say, 47bn and maybe twice that, from the banks and to the State, with repayment in the form of cash, let's hope, in some years time, at an interest rate of only 1.5%. This is a big benefit to the taxpayer in Ireland:
*the billions he borrows means he avoids having to borrow the same elsewhere, at an interest rate of c. 4.5%
*the interest rate differential, alone - 1.5% v. 4.5%- over the ten years is hard to estimate but probably worth €5 bn to the borrower, (and €10 bn interest opportunity cost to the banks' shareholders)
* if the asset sales do not completely fund the repayment/redemption commitment, then the banks will be hit for the shortfall (or the bonds will simply not be redeemed)
* if, as is more likely, a substantial profit is made on the sale of the assets, even after high management and advisory costs, all but c.2.5% will be retained by the State.
Its surely a no brainer for the State, and rather harsh on the 150,000 Irish small shareholders of the two main banks, who are now the majority owners of them, and who also have to pay out €560 million annually to the State (8% of preference share capital invested in AIB/BOI) AND 25% of their equity, for the privilege of a State guarantee. (I dont think shareholders of other banks in the EU, also in receipt of government guarantees and capital, have been treated so harshly). Also, the two main banks seem to have had to provide c. €6-8 bn (?) in funding to the State's bank, Anglo Irish...
The campaign against our two main banks - whose "sins" of over-optimism were minor compared to those of their competitors in the US/UK and elsewhere - has been very effective in keeping down the share prices, valuing both banks equal to or less than one years core earnings (!!) (EU banks are still trading at 15-20 times core earnings )..and perhaps setting them up for take over by some foreign banks seeking a juicy source of cheap (depositors) funds.
Do we really want our banking industry to come under foreign management? (We see now the foreign lenders pulling home their funds, under pressure from their own governments..is that not a lesson to us?)