UP TO 10% OF HOME EQUITY WITHDRAWN IN BOOM - Irish households were withdrawing equity from their homes to the tune of 10% of their collective disposable income at the height of the property bubble, according to a new study by two economists at the Central Bank. The Irish Times says that while this further inflated the bubble, once the bubble burst, the process went sharply into reverse and has been deepening the downturn. Households are now injecting about 10% of their combined disposable income into their homes. Reamonn Lydon and Brídín O’Leary have for the first time attempted to measure the way people withdraw or inject wealth out of or into their homes. Their model is based on ones used in Australia and Britain and measures trends over more than three decades. Their figures show that equity withdrawal at its peak was similar, if slightly higher, than during the British property booms of the late 1980s and mid-2000s. During the Irish crash, however, the study notes that “relative to the UK, Australia and historical Irish comparators, the level of equity injection as a percentage of income is extremely high”. The study finds that changes in the supply of and demand for credit were the key drivers of the withdrawal process, along with price developments in the residential property market. “Increased competition during the early- to mid-2000s played a significant role in reducing mortgage interest rates, allowing for greater household leverage by lowering the debt repayment burden,” the report says.
BANK OF AMERICA SHIFTS DERIVATIVES TO UK - Bank of America has begun moving more than $50 billion of derivatives business out of its Dublin-based operation and into its UK subsidiary, according to people close to the operation. The move, part of the group’s global drive to rationalise its operations, has been encouraged by regulators but will also allow BofA to benefit from tax breaks stemming from the accumulated losses in its UK business, writes the Financial Times. Bank of America, the world’s number 10 bank by assets, is currently one of the biggest banks in Ireland. Although its domestic Irish operations are small, it has traditionally routed a large chunk of its European operations - corporate lending and cash management as well as the derivatives book - through the Dublin subsidiary. BofA inherited the operation, MLIB, when it acquired Merrill Lynch at the height of the financial crisis. But bankers said Irish officials had made it clear they were uncomfortable with such a large book of business being Dublin-based, theoretically posing a risk to Irish taxpayers. At the same time UK regulators were keen to have closer control of Bank of America’s European business, whose operational management is in London. In the boom years many banks flocked to low-tax Ireland, routing Europe-wide business through Dublin. That tax advantage is now diminishing, as the UK cuts its corporate tax rate, with a further reduction to 23% due in April.
THIEVES TARGET CHEESE AND RAZORS AS €500m IN STOCK IS SHOPLIFTED - Shoplifters and staff are stealing stock worth over €500m from Irish stores a year. The problem has intensified in the past two years, with gangs now blitzing towns and cities for high-value branded goods and jewellery, says the Irish Independent. Experts have also noted a surge in theft of everyday goods such as meat, cheese, razor blades, pizzas, deodorant and coffee. Ibec's retail division estimates that €512m worth of goods is stolen from stores a year, with a survey of its members indicating that the problem is getting worse. In 2009, 19% of retailers reported theft of stock but this soared to 35% in 2012. Ibec's retail director Stephen Lynam said staff were responsible for around one-third of the thefts and shoplifters the rest. "This is a staggeringly high cost that is factored into retailers' pricing decisions, so the consumers ultimately pay for the criminal activity of the few," Ibec's 'Tackling the Black Market and Retail Crime' report found. Shoplifting and break-ins now add up to 10% to the operating costs of some retailers. The UK-based Centre for Retail Research said shoplifting in Ireland was particularly acute over Christmas, making it the worst in Europe as retail crime cost €54 per household. But there had also been a surge in theft of everyday goods, said its chief, Professor Joshua Bamfield.
ADVERTISING GIANTS STEP UP TAKEOVER SPREE - Advertising and marketing agencies can expect to see a boom in mergers and acquisitions this year as big holding groups step up their acquisition efforts, especially in digital and social media. That's the verdict of a string of City firms, led by the corporate advisory boutique Clarity, which has found that the number of agency buyouts has soared writes the London Independent. The "Big Six" marketing and communications groups, which include WPP, Publicis and Omnicom, bought at least 107 agencies globally in 2012 - sharply up from 54 in 2010 and 98 in 2011. The biggest takeover in Britain last year was the £3.2 billion purchase of Aegis by Japan's Dentsu, but there was a series of other deals, including the sale of Adam & Eve to Omnicom, BBH to Publicis and AKQA to WPP. "We expect this level of activity to continue," said Marcus Anselm, partner at Clarity, who described this trend of big groups using acquisitions as a means to hire talent as "acquahire". Mr Anselm cited the sale of Adam & Eve, on which he advised, as an example. Omnicom has used the agency, famed for its hit John Lewis ads, to inject energy into its existing subsidiary DDB, by merging them to form Adam & Eve/DDB.