Member Info for johnmcclean

Not sure what we disagree on with China Torquay. As regards Shannon and the American president that was a simple decision. English speaking access to the new EU market. Lots of labor available at the time and of course throw in many tax incentives.

Of course Trump may not last long enough to do anything. The vultures are circling..

https://www.huffingtonpost.com/entry/donald-trump-tax-fraud_us_5bb3d403e4b0876eda99339b

The US was totally complicit. They sought out cheap labor and goods after the terrible high inflation of the 70's. At that time the states was growing and production was constrained by a labor shortage. That pushed up labor costs and drove inflation. To control the inflation interest rates went up..and up and up eventually killing the boom. So business responded by expanding the labor force. Not in America though. Globalization was born and the labor force grew by a billion. Since then workers that were at the bottom of the value chain have been more or less cut loose. This is more evident in the US than Europe. Our welfare schemes kept the workers heads above water. It also cost a lot of money so European countries invested in education to move up the value chain and beat the China drain. Ireland is a perfect example of that.

So back to China and where we are now. China can't build many more useless projects so they are in the middle of a new plan. Lend money to it's neighbors so as they can buy Chinese excess production. Rebuild the silk road. Build a road through the middle of Africa. All with borrowed Chinese money to buy Chinese goods. Another pyramid scheme in the making.

Unfortunately the US has a price to pay for withdrawing from the global market as well. Putting tariffs on imports means higher US inflation. Bit of a lag effect so mid next year it will be obvious if they continue on the present course. The US feels this is the price they must pay to control China economically as well as militarily. The big down side though is interest rates. More jobs stay in the US, labor gets tight and wages rise. Interest rates must follow up as will the dollar leading to an noncompetitive US which in turn leads to recession.

Trump has to know that, hence attacking the FED for rising rates early this year. It has also lead to attacks on Europe("our bigget enemy") for currency manipulation even though it's actually his own fault. Well mostly. The ECB zero rates are the problem. If they rise in some kind of step with the US then it will help the US a bit and keep the dollar more competitive and give him room to attack his real enemy China. The spat with Mexico and Canada were a side show. You would have to think the IRAN situation is interesting as well. By far the biggest fall out from that has been oil prices shooting up to $80. Cause...Trump, effect...high oil, result...EU inflation, response... higher interest rates. Interesting times ahead

If Italy had stayed out of the EURO would they be better off now? No chance. If the only economic policy of your country is to devalue your currency then the result can ending up in a spiral like Venezuela (extreme example but that can happen) . Its not all about the black ecomomey either. Cash in the black will eventually make its way back into circulation unless every person and business runs a second book. If you sell an item or get paid in cash and then do the shopping with it well it's back visible again. The problem, like in plenty of countries is lack of investment in infrastructure, education, business and so on.

Trump is a despicable human but on trade and China he is right. For the last 15 or so years China has soaked the cash out of most of the Western world and used it to rebuild their country at the expense of their trading partners. The US has been the big looser. When an American buys a TV in walmart on the cheap, the bulk of the cost heads straight to China. They end up with dollars to build China while the US (Italy) loose out. Here's a startling fact. Over 3 years 2010,11 12 China produced more concrete than the USA did over ALL of the 20th Century. That leads into a new issues that China now faces because it's not just concrete, its steel, its Aluminum and so much more. The question for them is What do you do with all that capacity now? Answer so far is print more money and build cities no one needs. result...BUST.

Chris I think you are putting thoughts in the head of British voters that are plain wrong. I'd be willing to bet that your average no voter hasn't a clue about the European birth rates, European interest rates, European Cultures, European GDP rates and don't care either. In fact the irony of what you say is that for a lot of the last century the British spent a fair bit of effort trying to alter the culture of quite a number of countries.

I wouldn't be so sure either where the biggest basketcase is or will be in the future . It's quite possible that both Europe and the UK were in for another period of change anyway. Not just economically but politically and I don't mean just from within. The bear and the tiger are sharpening their claws and the Eagle...well that's another story. I am sure though that a united Europe would have been stronger but that's unlikely now. Safety in numbers and all that. When the fog does lift the view will have changed considerable so becareful what you wish for as they say.

UBS are only mentioned because they are among the banks selling the debt on behalf of BoI.
BoI, as with all ECB regulated banks are required to hold a certain amount of funds that would not have to be repaid in the case of another banking crisis. Banks have set up new Holding Companies where this debt will be held. Not all the banks reserves have to be made up of this kind of debt. In BoI's case its 13billion. Before yesterday they were 5 billion short of the target but they have until 2021 to sort it out. As they have 13.5% CET1 you would think that they should't need to hold much more total capital but it seem that they will have to increase total reserves by close to a billion because of this new rule.

just to be clear the Stabilisation has nothing to with the share price. Its all about stabilising the EU banking system. All banks have been given an amount of funds that they must hold in reserves by 2021. The funds can be borrowed from the market as BoI did today. the thing is the borrowed funds are unsecured and so cost the banks more in interest. The unsecured bit is what is important to the EU Single Resolution Board who over see the scheme. In future if a bank fails then the borrowed funds are not to be repaid. That Stabilises the EU banking system.

the positive is less chance of a bank failing but the down side is the need for our bank to hold a bigger reserve of funds and more costly annual interest repayments. It going to put further drag on the NIM as well and as a consequence the share price.

investec;
Bank of Ireland Group (BIRG) yesterday issued a mandate to a syndicate of banks in regard to the potential issuance of its first senior unsecured HoldCo debt issue, this is needed to meet ECB and BOE MREL targets given to the bank earlier this year. The 5 year senior unsecured bond sale could take place in the near future, subject to market conditions, according to Bloomberg. We expect any such issue to amount to between €500-750m, with the bank likely looking to take advantage of the calmer market conditions seen this week, and ahead of the expected increase in new issuance generally seen across the sector in September after the summer lull. BIRG last year undertook a corporate reorganisation which saw the creation of a new group level holding company for the specific purpose of issuing MREL debt. BIRG had previously been advised in May by the ECB’s Single Resolution Board and the Bank of England of its MREL target being set at 12.86% of total liabilities and own funds as at December 2016, this requirement is to be met by the start of 2021.

observe, i have a question I am sure you are able to answer.
It's a long time ago now but from memory did BoI not put by 8 billion to deal with loan losses. How much of that have they actually used because I don't think its anything like 8 billion. How is that accounted for on the balance sheet?

something to lighten the mood. https://youtu.be/svwslRDTyzU

You put up a good defense S.
the reason I started this discussion was of an experience I had a couple of weeks ago. I was working on a property in rural Cavan. A builder built 4 big houses on a country lane. All mansions. €750,000 or so. Unfortunatley the crash came with only 1 sold and 3 at various stages. He went bust leaving loans unpayed. In The one house that was sold the owners split up but couldn't get a serious offer for the house. they have left the country. For 10 years that house has been left. You would'nt believe what time (and vandals) can do to such a house. For legal reasons the banks have failed to sell the house and it's debatable they ever will.
This is not an isolated story. The original builders loans are long written off. It's the mortgage on properties like this
where the bank holds an asset of say €500,000 thats on the books as a NPL. The actual value is possibly 0. If they don't sell off soon then it's either write it off for 0 later of just let it sit in that 5% of NPL's that the market regards as acceptable.
Even if the loss on a sale to a VF was 50% they can still use that loss against future tax liabilities. That stable door may close at some stage as well.
Am i looking at this in too much of a simplistic way?

Senator I'm not going to argue with you on the maths of this. For the most part i don't agree with selling off loans. However, BoI are now reaching the bottom of the barrel at the same time as time is running out. The loan book at this end will undoubtedly contain NPl's that will never be sorted for legal reasons an well as financial. Some of the loans will probably be in the UK. I think at least 2billion should be cut loose now and clean the balance sheet for once and all. Between brexit, trump,Italy, deutsche ect there are lots of reasons for acting not.

BoI need to follow the other banks quickly and sell a chunk of their NPL before someone slams that door on them. At least 2 billion, but even 3. I know it's stated policy not to do this but they need to back track on that. If not they could end up as the worst bank in Ireland for holding rubbish loans.

https://www.independent.ie/business/jobs/bank-of-ireland-tipped-to-cut-up-to-one-in-five-jobs-in-shakeup-37154615.html

Available at 7.00am on Monday 30 July

Sounds like you are guaranteeing this investment. Fair play to you.

"Great opportunity to make big money out of small money."

"Very exciting times. Anyone with 5k hanging around have a punt. Its going to be a blockbuster company."

https://www.vanityfair.com/hollywood/2018/03/china-hustle-documentary-financial-crisis-scandal-director-interview

The China Hustle on Netflix

A bit of clarification around today. The buffer relates only to Irish loans so therefor BoI will not be liable to set aside 1% of loans but 0.60%. The UK loan book is exempt for now anyway.
BoI has a capital requirement full loaded of just over 11% now. However at their last report they held above 13% so well above what they must hold. When the new buffer kicks in they have a room to absorb it. Good chance markets won't see it that way and will expect the bank to raise their CET1 above 13% form next year on.

https://www.independent.ie/business/irish/government-seeks-advisers-for-sale-of-its-bank-stakes-37086147.html

https://www.rte.ie/news/business/2018/0705/976636-central-bank-buffer/

Could have been worse but its still more unproductive cash to be retained. My understanding is that as the bank grows lending they have to set aside 1% of the value. At the minute the loan book is not growing so nothing to set aside for now. However, say brexit is a damp squib and STG shoots up then so too will the loan value because of the % of UK business on the books. When this kicks in next year BOI could have a nice bit to set aside with no real extra lending to show for it.
Happy to be corrected if my interpretation is wrong.

Tha Irish CB has been hinting for the last while about forcing Banks here to hold a bigger capital buffer. Its looking inevitable that will happen soon. Question is how much. It's not clear if they consider 13% CET1 enough or if they will go beyond that. If they do force banks to do more the ONLY looser will be the shareholders. What ever the amount decided on it will come straight out of the share price and the dividend. It's possible those in the know (we small share holders are definitely not in that club) have been preparing already and that may explain the crap run BIRG has been on for the last while.