independent

Thursday 17 April 2014

A year of drama over Nama and house prices beckons as Troika exits stage left

Business editor Nick Webb reads the runes to predict which big business stories will make the headlines in 2014

The Treasury Building where NAMA is based

OUR prediction last year totally nailed the biggest deal of 2013, by forecasting that 3 would swoop to buy Telefonica's O2 Ireland business. We were also on the money when it came to property prices reversing a five-year trend, as well as calling it right on the prom note deal and Kentz pulling off a mega buyout.

So what will be making the news in corporate Ireland in 2014, Business editor Nick Webb digs through the entrails to predict the big stories over the next year.

A new force in banking?

The bailed-out banks are years away from functioning normally and providing decent credit or other services.

Other banks like Danske and ACC have exited the retail sector. There's a continent-sized gap in the market, which is being slowly filled by shadow banks or other alternative sources of finance.

New start-up banks -- unencumbered by legacy debt -- will move to the forefront over the next year. Virgin Bank or Metro Bank in the UK may consider setting up here, while the supermarkets like Tesco and SuperValu will also enter the financial services market.

Other players including private equity-backed financial services companies are also going to shake up the high street lending business. It'll also see crowdfunding becoming a more and more accepted way for private companies to raise capital.

Nama under offer

A private equity behemoth like Blackstone, TPG, Lone Star or Carlyle is going to look long and hard at making a bid to take over all of Nama's loan book as the economic situation improves further.

The Nama property loan book will be further carved up and flipped to various specialist vulture funds or other finance houses.

Nama, of course, will argue its case strongly. It would be far, far better if Nama stays as part of the civil service rather than switching to ownership of financiers in sharp suits. The civil service will win. As usual.

Nama will also find itself involved in an increasing number of lawsuits as the year plays out.

Ardagh to make a mint

Paul Coulson's glass bottle and tin can maker Ardagh will cut a deal with the US Federal Trade Commission to allay fears that it is developing a dominant position in the North American market.

It will sell off a number of its assets to a new player. This will clear plenty of roadblocks and after tapping up investors for a cool $500m, Ardagh will power ahead with IPO plans in the autumn.

The high, high debt levels racked up as part of its bumper acquisition spree will test the mettle of investors . . . but Coulson and Co will get the NYSE flotation away, banking hundreds of millions for the top executives.

Bumper buyouts

Liam 'Mr China' Casey could end the year even richer than he is now, as his Apple supplier/designer/ distributor PCH becomes a target for rivals.

The China-focused tech outfit is soaring in value and could be mopped up by Apple or one of the other large consumer electronics group.

Keeping with the technology sector, Niall Norton's Openet will finally get bought, with Eric Mosely's Globoforce listing on the Nasdaq. There'll also be more activity in the financial transaction and healthcare sectors, with the likes of Monex and Slainte Health making headlines.

There will also be suitors for Datalex. The Seamus Mulligan backed Jazz Pharmaceuticals could be the bumper buyout of 2014. Don't rule out some Chinese interest for Glanbia either. Former Tullow executives will get their act together and float off a new oil group called T5.

The Collison brothers will have huge, huge cheques waved under their noses as some of the bigger financial services firms realise that their Stripe.com is the real deal.

Housebuilding no longer seen as a dirty job

It'll be a year when entrepreneurs can stand up and say "I'm a house builder and I'm proud of it!" There'll be new entrants into the market, some backed by some very wealthy Irish business men, and property plays will become more and more common.

And 2014 will also see the return of some formerly smashed builders -- you can't keep these guys down forever. There will be more activity on building sites -- and Spar may reintroduce a new version of the "breakfast roll".

Property prices to fall

Residential property prices will end the year falling. There's a cash-fuelled bubble inflating in certain Dublin suburbs.

The working through of the pent up demand, coupled with an exhaustible supply of cash buyers will see prices in South Dublin stall after the summer (it'll be a scorcher).

The economic crisis has meant that potential house buyers have been saving for far longer than normal. They have way bigger deposits and need smaller mortgages.

This won't last. The banks will eventually work through the cash rich buyers and when the barrel is empty . . . qualifying for credit will be ridiculously hard. This lack of money for homes will see a fall in prices. Not massive . . . but enough to jog the memory.

Prices in the rest of the country will largely mark time.

Markets to correct

We're not talking about full-blown carnage here ... but global stock markets will stop and wonder exactly what it is that is propelling them forward. It's not the earnings outlook from their constituent companies. Nope, it's largely fuelled by the wall of cheap money coming into the markets.

When the Fed and ECB decide to turn off the tap a little more, this will cause a complete shemozzle on trading floors. And prices will fall sharply.

There'll be localised wobbles too. China will do something to scare the bejaysus out of investors. Probably something to do with its banks being so incredibly overexposed to the domestic property market.

After being utterly clobbered in 2013, gold may make a minor return to favour. Oil prices will be weak.

Political departures

Finance Minister Michael Noonan will decide he's done enough to fix the economy. He'll step down as Finance Minister as the Troika becomes a distant memory.

Large numbers of hard worked civil servants will throng the streets in joy.

However, it'll cause a major cabinet reshuffle. Enda will be faced by the mother of all headaches.

Is Brian Hayes too lightweight?

Would Leo Varadkar or Simon Coveney become too much of a threat if they got experience of Finance?

Could Richard Bruton ever be forgiven fully for the coup attempt?

Could he get away with putting Big Phil there?

It'll be bloody with bits of bone and gristle sticking out everywhere. Think Kill Bill meets The Wild Bunch.

Strikes-a-plenty

Now that the Troika has gone, there's no need for good behaviour anymore. The big stick of being returned to the Stone Age by having the ATMs run out of cash is no longer there.

The politicians are back in charge of the asylum. Trades union bosses must be laughing themselves silly. There's been five years of moderately good behaviour despite the aching austerity.

The ESB sabre rattling before Christmas shows how weak the Government really is when faced by determined industrial unrest. Expect strikes -- or lots of scary threats -- at An Post, CIE, various bits of the HSE and other key parts of State apparatus. The government will fold like a soggy paper napkin.

A rank-and-file ESB staffer -- someone who wears a helmet and a hi-viz jacket -- will earn more than €100,000.

Economy to grow

If there's one thing that we can safely predict year after year, it's that the Department of Finance predictions for the year will be miles out.

The most recent forecasts from the mandarins on Merrion Street is that the economy will grow by just 1.8 per cent. Those figures will undershoot reality by quite a bit, with GDP growth more likely to be at least 50 per cent better, fuelled by a strong FDI pipeline and a better than expected global recovery.

The economic growth will see the State coffers fill faster than expected and by mid-year there'll be a rising swell of demand for an easier than expected budget. There'll even be a few calls for tax breaks for builders -- although that'll only come from the Fianna Fail TDs.

Consumers get stiffed

Ah, another old reliable. The banks will continue to extract blood and marrow from their victims . . . I mean customers.

New and improved fees will be introduced.

Variable rate mortgage margins will keep rising as those lucky ones on trackers feel warm and cosy at night. There'll be a renewed attempt to try and deal with the tracker mortgage black hole as the banks try to extricate themselves from billions of loss-making home loans.

While the banks will be hitting consumers hard, they won't be the only ones. Despite the likelihood that oil and gas prices will be soft for 2014, the ESB and other energy providers will ratchet up prices even more.

Health insurers will also lob a few extra per cent on to the cost of their annual policies.

The numbers exiting private health cover will continue to rise and the public health system gets close to meltdown.

Michael Fingleton's bonus

Nope. He won't give it back in 2014 either.

Irish Independent

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