NO MAGIC WAND FOR IRISH PROPERTY WOES - Lloyds Banking Group, which is 41% UK-government owned, has said its impairment charges increased largely due to challenges specific to Ireland and to some degree in Australia. Overall it reported pre-tax profits of £2.2 billion sterling in 2010 compared to a loss of £6.3 billion in 2009. The bank reported a significant increase in its loss before tax in its Wealth and International division which includes its Irish operations. The losses rose from £2.3 billion in 2009 to £4.8 billion last year, predominantly due to what it calls the material deterioration of the economic environment in Ireland in the last three months of 2010.
Lloyds said that overall its impairment charge in Ireland last year was £4.2 billion. It blamed business and property loans, with 53.7% of its Irish loans impaired at the end of last year. Early last year it shut its Halifax retail arm, and towards the end of the year Lloyds said it was shutting Bank of Scotland (Ireland). Its deposits business has since merged into Bank of Scotland and its loan book of over €31 billion is now being administered by Certus, a service company set up by BOSI's former management.
Justin Urquhart-Stewart, of Seven Investment Management in London, says that we are probably seeing the worst of the bank's figures as it tries 'to get rid of all the dead bodies'. He says it may actually be over-provisioning so that in the future it may be able to claw something back. The analyst says that the incoming government here should create incentives for growth and should concentrate on what Ireland is good at - entrepreneurship and small and medium sized businesses. He says that banks here should become investment banks, adding it is handy that the Government already owns most of the banks here. He says that Lloyds and most other banks now realise that the property market in Ireland - as well as Spain - is going to be 'awful' for years to come and governments should focus on where growth can be achieved. He says there is no magic wand for the property markets in these countries.
On the start of the wind-down of Anglo Irish Bank and Irish Nationwide Building Society, Mr Urquhart Stewart says that international investors will take some comfort that the transfer of the lenders' deposits to AIB and Irish Life and Permanent has happened. He says the election will also help change the current negative attitude to Ireland and its banks.
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MORNING BRIEFS - A new survey out today suggests that Ireland is the second most attractive country globally for foreign direct investment. Research by National Irish Bank shows that Singapore is still the most popular destination, with Thailand third. It shows that the number of FDI projects won by Ireland last year increased by 15%, with a corresponding increase in the rate of job creation.
*** Oil is near $111 a barrel this morning, as analysts' worries about Middle East supply disruptions ease. Brent oil prices had jumped more than 7% to almost $120 yesterday. Analysts said that the mood had been helped by comments from Saudi Arabia and the International Energy Agency. Saudi Arabia said that it would step in to fill any shortfall in supply should it be needed now or should the Libyan situation deteriorate in future. At the same time, the IEA said that Libyan production had been less affected than many observers had first forecast.
*** On the currency markets the euro is trading at $1.38 and 85.6 pence sterling.
