Year of big change in store for business, banks and Ireland Inc
The recession will end but we'll barely notice, says Nick Webb, who predicts tough times for some big-name firms
WE were on the money with our predictions for 2009. We said that the banks would end up being the biggest property moguls in the country -- we just didn't know that it'd be the state bank that would do it.
We were right about continuing falls in property prices and that directors' loans would take centre stage. We also predicted that Enoc would make a play for Dragon Oil and that Boundary Capital and Barry O'Callaghan's EMPG would face massive debt issues. And wow, we totally nailed the movements in oil prices.
But, eh. . . we weren't completely right about Ryanair buying Aer Lingus -- but we still think it'll happen.
AIB to have new owners
Once Nama gets up and running, maybe in the summer, AIB will be in play. It'll finish the year in a completely different guise.
Canadian Bank CIBC is thought to have sniffed at AIB's bum. It may be interested in taking the bank's 22 per cent stake in US Bank M&T. AIB's Polish operations, Bank Zachodni, may also be sold off, with Polish bank PKO plus other European banks such as Societe Generale also be in the running.
AIB may need a rights issue to bolster its capital position but it may also seek to sell assets or indeed a major stake in the bank to raise money.
However the threat of nationalisation continues to hang over the bank, with Central Bank governor Patrick Honohan (above) indicating that the State may have to increase its shareholding in the troubled bank.
Bank of Ireland will also need to launch a rights issue at some stage during the year.
However, we should be prepared for the worst as consumers will yet again be stiffed as the banks seek to squeeze every last shekel out of the paying public in order to start paying back the expensive state loans.
Ryanair to eat Aer lingus
Michael O'Leary (below) says that he isn't going to do it. But we figure that he is. Aer Lingus is receiving last rites as management try to cut operations to the bone. Dwindling cash reserves and a biblically bad operating environment, mean that things are critical for the airline.
Can the Government afford to bail it out? Nope. Who has billions of euro in cash looking for a home? Ryanair. The unprecedented market conditions may see Europe take a more benevolent view on the clear competition issues arising from Ryanair owning Aer Lingus.
Colm Barrington must be desperately trying to find a less scary partner than Michael O'Leary. This list can't be very long. Lufthansa, British Airways, KLM/Air France, plus a few other flyboys. Buckle up, it's going to be a bumpy ride.
Irish life & Permanent To be gobbled up
When Kevin Murphy (below) finally sheds the Permo albatross and lumps it into the so called "third force" of Irish Nationwide and EBS, he may have another front to fight.
With its rubbish banking bit stripped away, Irish Life will look kinda foxy. Dirt cheap. . . but still rather hot.
Big European insurers such as Axa, Allianz or possibly even Aviva, if it could solve competition issues, may be looking to bulk up in the life and pensions market here, with Irish Life a ridiculously obvious target.
Kerry and Glanbia to get close
In the past month, there have been consistent murmurs that something is going on in the Irish food sector.
Could it be Greencore or Aryzta? Possibly. But some well-placed financiers are pointing to activity involving Stan McCarthy's Kerry Group and John Moloney's Glanbia. Milk group Dairygold has also been mentioned in dispatches. The talk on the trading floors is for some form of merger of parts of the businesses. We forecast that this means that something will happen with the milk and dairy operations.
More rights issues
Tullow and CRH got biggies away last year. Could Tullow do it again? It needs big money and it needs it fast as the oil firm led by Aidan Heavey (right) becomes involved in possible bidding wars for stakes in a number of its Ugandan and Ghanaian oil fields.
Despite a new €200m banking facility, Heavey may still need a couple of billion extra to stop Tullow from being pushed around by the larger partners. Talk of a deep-pocketed Chinese bidder for the company continues. Either way, it'll be a game-changing year for Heavey.
Other Irish resources and exploration companies will also need access to funding, so expect shareholders to be tapped up.
Outside oil and minerals, companies such as Smurfit Kappa, McInerney and Cantrell & Cochrane may also decide to pull rights issues to raise cash. Major private companies such as Philip Lynch's One51 and Jim Barry's National Toll Roads will also look to magic up big, big amounts.
Increasing number of flotations
Ray Nolan's WRI was the top tip to float in 2010 before it got bought for €240m last month. But stability in the markets may see a few other Irish companies consider listing in the coming year.
Others may spin off businesses onto the markets, as IAWS did with Origin in 2007. NTR may look at floating some parts of its business, such as waste, solar or wind energy units.
Some Irish pharmaceutical companies -- such as Azur Pharma -- may also edge towards the markets. And could the banking "third force" of the EBS, Irish Nationwide and Permanent TSB get a separate stock market listing?
Will gold shoot all the way up to $2,000 per ounce, as some commentators suggest? We figure that a fragile enough recovery in the US may see the dollar looking marginally more healthy. This, combined with profit-taking from speculators, may see gold prices weaken.
However, much depends on the strength of the Asian economies. We see gold yo- yoing sharply this year. Sugar could be the commodity to short heavily as it has bubble written all over it. Oil, on the other hand, may slip to the $60 level before storming back.
Big names to struggle
We all know that some of the big names in the property and construction sector are in real trouble. Are they broke? Nobody knows. There may be an exodus to other jurisdictions where personal bankruptcy laws are less onerous.
Outside the mainstream developers, some seemingly smart business people are also in the soup. These are company bosses and entrepreneurs who had a little property investment on the side. They have borrowed heavily and the banks are getting shirty. It could be a year of forced sales and surprising meltdowns.
Ireland will come out of recession. . . but you'll barely notice the difference. Plus 0.3 per cent growth feels much the same as minus 0.3 per cent.
There may be a false dawn early in the near year, after Brian Lenihan's (above) post-budget boost to confidence. The real problem will come when the ECB begins to increase interest rates in the tail end of the year and when all the massive state incentive packages begin to be withdrawn. Expect something nasty when that happens. However, price deflation will slow down in the middle of the year and although unemployment will continue to rise, it may top out at 13 to 14 per cent. Some big state agencies may lose a lot of jobs as their financial situation worsens. Property prices will flatten out and some prime sectors may even see a shock rise. . . but it may not be sustainable.
Michael Fingleton not to give back his €1m bonus
Former Irish Nationwide boss Michael Fingleton (below) hasn't given his controversial €1m bonus back to the society. We figure this could be a long-running saga and that he won't give it up in 2010.
"Fingers" and the likes of Seanie FitzPatrick, David Drumm and other former bankers won't be far from the headlines during the year.