Donohoe mulls playing angry shareholder role at AGMs

Business Week: another mammoth landlord; Ryanair woes; and ECB to wind down QE

Minister for Finance Paschal Donohoe threatened to become an activist shareholder in the three banks in which the State has shares. Photograph: Brenda Fitzsimons

Minister for Finance Paschal Donohoe threatened to become an activist shareholder in the three banks in which the State has shares. Photograph: Brenda Fitzsimons

 

The spectacle of angry shareholders on their feet, waving clenched fists as they demand answers from ashen-faced bankers is not an unfamiliar one at annual general meetings held during turbulent periods.

Less familiar, though, would be the sight of the Minister for Finance on his feet, berating State-owned banks on behalf of the State – but that very prospect was raised this week as Paschal Donohoe continued to grapple with the tracker mortgage scandal.

Donohoe, who met the chief executives of the banks this week to “admonish” them, threatened to become an activist shareholder in the three banks the State has shares in – AIB, Bank of Ireland and Permanent TSB – if sufficient progress is not made.

Sources said the Department of Finance could even resort to standing up at shareholder meetings and making protest statements. Some suggested the State could also lodge protest votes against individual bank directors.

The language has been strong from the Government, which – like the public – still remembers all too well the role of the banks in the financial crash. That being said, it has deferred action against those that don’t resolve matters until the summer due to the complexities involved.

The scale of the scandal became a little clearer this week, as the Central Bank said more than 21,000 mortgage customers have now been impacted. That figure does not include the 7,100 people who had their cases settled before the regulator began sniffing around.

Let’s hope Donohoe didn’t have The Irish Times in front of him as he munched on his corn flakes on Wednesday morning, because its report that thousands of AIB fixed-rate customers have been unfairly excluded from its redress scheme will not have sat well.

It means that the numbers entitled to compensation by the bank could more than double, and such a surge would force the bank to increase the €190 million it has set aside to tackle the scandal. It has already paid out €133 million.

Meanwhile, a customer of Permanent TSB settled a case with the bank in what was understood to be one of the first successful tracker mortgage cases taken since the scandal broke.

Bank of Ireland has set aside €25 million for customer redress and compensation, and said any increase in that should be “manageable”. Francesca McDonagh, the bank’s new chief, said sorting the mess out was “a personal priority”.

Positive signs on housing

It has sometimes seemed as though the State has been standing still when it comes to solving the housing crisis, but this week there were finally some positive signs that houses are being built.

The Goodbody Housebuilding Tracker, based on building energy ratings, showed that although official estimates are over-egging activity, there were still 1,049 residential units completed in September, which represents 86 per cent year-on-year growth.

Semi-State forestry group Coillte is planning to apply for planning permission for about 59 new homes on a 3.2-hectare site that it owns in Moycullen, Co Galway. It is one of three sites – the others being in Cork and Mayo – that is surplus to its operations and potentially suitable for residential housing.

Meanwhile, the National Asset Management Agency funded the building of more than 5,500 new homes up to the end of last month, according to its latest figures. It has been providing funds to debtors to build new homes since 2014.

Another 9,300 are either being built or have planning permission. The agency has sites for a further 10,000 houses and apartments and its clients are either seeking permission to build on them or will do so within a year.

Many commentators have been calling for more construction of apartments to deal with the crisis, but a report by the Society of Chartered Surveyors Ireland this week claimed it was more expensive to build apartments than houses.

Of course, it was little more than a lobbying exercise from what is the professional body for construction and property professionals. The group later called for range of measures to trim costs, including a 10 per cent reduction in the size of units.

Some people, though, have been lucky enough to find homes. New figures from the Central Bank showed new mortgage lending of just over €3 billion by the five big banks in the first half of the year, which was up 33 per cent up on the same period in 2016.

For the rest, it’s all about renting, and the State could be in store for another behemoth in the private rental sector if Marlet Property Group closes a deal to sell 1,205 apartments under development in Dublin for about €450 million.

It’s in talks with a multinational investor in what would be the biggest deal of its kind in the Republic. Assuming a deal goes through, the buyer would be the second-biggest private rental landlord in the Republic after Ires Real Estate Investment Trust.

Separately, Airbnb said new guidelines on planning applications for short-term lettings have rendered the Republic’s regime “one of the most restrictive” in Europe. The Government’s plan is aimed at preventing property-owners leaving the rental sector.

Unrest of Ryanair pilots gathers pace

Ryanair’s woes continued to rumble on, as pilot unrest over rights to representation and collective bargaining gathered pace.

Capt Jon Weaks, president of the Southwest Airlines Pilots’ Association and Capt Dan Carey, president of the Allied Pilots’ Association, who represent almost 24,000 US pilots between them, met Ryanair pilots in Dublin and London.

Both men said the turnout indicated that current efforts to introduce a new collective bargaining system at the non-unionised Irish carrier could succeed. Won’t Michael O’Leary be pleased.

In Italy, the airline avoided the prospect of workers striking on Friday after some trade unionists questioned whether crew based there were legally protected when taking industrial action.

Separately, Ryanair has delayed the introduction of its new cabin bag policy until the middle of January next year. It ditched its old policy of allowing customers to bring two bags on board aircraft without charge last month.

ECB announces quantitative easing wind-down

In another sign of fairer economic pastures, the European Central Bank announced it is to slowly wind down its massive programme of buying government and corporate bonds – or so-called quantitative easing.

It will cut the amount of bonds its buys from €60 billion a month to €30 billion from next January. The programme has been extended to September 2018 and the ECB has made clear that it could run beyond that, depending on economic conditions.

The ECB left its interest rates unchanged, and said it expected rates to remain at current levels for an “extended period of time”, which is good news for borrowers and for the Government in terms of its own borrowings.

Some 24 hours before ECB president Mario Draghi’s announcement, it emerged that the bank’s €2.3 trillion monetary stimulus programme, which started 2½ years ago, has helped shave €4 billion off the 2017 interest bill once forecast for the Republic.

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