AIB CHIEF SAYS ARREARS ISSUE TO BE RESOLVED WITHIN TWO YEARS - The issues of loan arrears, capital adequacy and profitability will all "effectively be resolved" in the Irish banking sector in the next two years, according to AIB chief executive David Duffy writes today's Irish Times. In an article by Mr Duffy published by law firm McCann Fitzgerald as part of its corporate outlook for 2014, Mr Duffy said: "The pillar banks [AIB and Bank of Ireland] are expected to return to profitability during 2014-15 and should be adequately capitalised to meet ECB [stress test] and other criteria unless there are changes to the rules at a European level." Mr Duffy said it was "vital that the business of banking is normalised sooner rather than later". He said a normal level of mortgage lending would be between €8 billion and €10 billion a year, not the €40 billion at the peak of the property bubble. "But right now, due to limited demand, banks are lending about half that level," he said. "With the banks returning to health, we will see the share of cash buyers in the housing market decline and first-time buyers have access to mortgages they need." Mr Duffy said 12,000 to 18,000 houses a year need to be built to keep in line with demographics and growth, "as well as appropriate commercial property developments".
PTSB FORECASTS 10% RETURN FOR ITS GOOD BANK UNIT - Permanent TSB has forecast a 10% return on equity for its good bank unit by 2017 under a plan to return it to private ownership, says today's Irish Independent. In a presentation to investors, the state-owned institution said it aimed to deliver a 5% return on equity by 2017 when its distressed mortgages were included in the arithmetic. News agency Bloomberg, which first reported the details of the presentation, said that Permanent TSB sounded an upbeat tone in its remarks. It told investors that Ireland's economy was improving, with positive signals from the property and jobs markets. "Investors are well positioned to benefit from improved consumer sentiment," it said. The bank confirmed last October that it expected to return to profitability by 2017. In the first half of 2013, Permanent TSB made a pre-tax loss of €131m compared with a loss of €587m in the first half of 2012. Operating losses before exceptional items in the first six months of 2013 were €449m, down from €457m in the first half of 2012. Permanent TSB plans to return the good portion of its bank to full or partial market ownership by 2017, the presentation given to investors last week confirmed.
IRELAND ACCOUNTS FOR 5% OF EUROPEAN M&As - Ireland accounted for nearly 5% of all European-based merger and acquisition (M&A) activity last year, in value terms. Deals in the pharmaceutical and financial services sectors boosted Irish-related M&A value last year, but activity - in volume terms - declined by just over 15% on 2012 levels, says the Irish Examiner. New figures, published yesterday by global information services company, Experian showed that 254 deals, involving Irish companies, were completed last year - down by 15.1% on the 299 done in 2012. However, the total worth of Irish-relevant transactions came to just under €38.6 billion; more than 39% up on 2012’s total of just over €27.7 billion. The increase was driven by a marked rise in large deals - typically measured by transactions of over €120m in value; with six noted rather than three in 2012. The largest of these was US drug maker, Perrigo’s $8.6 billion takeover of Irish biotechnology firm, Elan. Mid-market activity - deals valued at between €12m and €120m - declined, however, with transaction volume down from 67 to 43 and value down from €2.8 billion to €1.84 billion.
NESTLE ADMITS TO ERRORS IN INDIA EXPANSION PUSH - Nestlé, the world's biggest food company, has admitted to erring in India by ignoring more affluent consumers as it pursued those spending pocket change on sweets and noodles, says the Financial Times. “We made a mistake,” said Nandu Nandkishore, who heads Nestlé's Asia business. “We basically focused on driving the mass market, and we really ignored a little bit the emerging affluent segment.” The maker of Maggi noodles and KitKat chocolate bars, like other consumer goods companies, has been ramping up in emerging markets, which now account for 43% of its $98.2 billion global sales. However, like its peers, Nestlé is now being forced to redraw its strategy in the face of depreciating local currencies, deceleration in economic growth, the impact of inflation on input costs, and rising domestic competition. Such factors are especially punishing on cheaper mass-oriented goods, as L'Oréal, like Nestlé, has discovered. The French cosmetics group last week halted sales of its mass-market Garnier brand in China.