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July 30 2017 6:00 PM
You have to hand it to Permanent TSB chief executive Jeremy Masding. Last week he came out and gave the most frank interview from an Irish bank executive in a very long time. Everybody got a dig - the media, Sunday newspaper columnists, the market and even the government.
Yes, the same government that controls 75pc of the stock in the bank that Jeremy has been running since 2012. Perhaps that is what made it so honest, or maybe that is what made it so entertaining.
He accused the media and the government of "sycophancy" towards foreign banks in particular. "Imagine if Air Force One arrived here from Spain, you'd all be there, in the way you all are, sycophantic and throwing flowers and giving them all Guinness… well it is sycophantic," he said.
I am not sure why Air Force One would be arriving from Spain, in the first place, but I get the picture.
He went on to say, "when I look at the way the government treats foreign banks here, when actually I'm one of the biggest employers in Ireland… it makes you feel undervalued".
Jeremy is clearly not feeling the love. But the key question is does he have a point when he says the media and others are too critical of PTSB by constantly saying "the thing is crap?"
Here are a few places where I think Jeremy is right and a few more where, the "crap" word comes to mind.
He is right when he says the bank has made real progress. It has dramatically reduced non-performing loans (NPLs) in recent years. It has also returned to profitability, having reported a net profit of €53m for the first six months of 2017. It has also returned money to the exchequer through the sale of shares.
He is also right when he suggests that AIB has been feted in the press with its €3.4bn IPO especially given that it did receive €21bn of our money. And he has a point when he suggests that his staff have worked hard, essentially in the trenches for the last number of years battling a broken business model (not of their making) and managing to return to profitability.
But here is where I would beg to differ with Jeremy's comments, made in the Irish Independent. First of all, he isn't using the appropriate pronouns. For example he said: "I made a distribution! I gave you €1.3bn back. I sold Irish Life." His use of the word "I" here is wrong in all three cases.
He didn't make a distribution, the company did. He didn't give us €1.3bn and he didn't sell Irish Life. The company did, under the direction of its board and primary shareholders - us.
He said he gets annoyed when commentators talk of the need for more competition in banking because with "five scale plays" we have enough banks for our population.
We have five but two of them have over 50pc market share in the mortgage market. The top three have 82pc of the SME lending market, although he rightly points out that PTSB plays an important role there.
According to the Central Bank, AIB, Bank of Ireland and Ulster Bank had 95pc SME market share a year ago, and that has now drifted to 82pc suggesting somebody is making solid progress.
Rather than pillory PTSB by suggesting it is "crap", in Jeremy's view the final hurdle is in sight. That hurdle relates to certain legacy non-performing loans for which forbearance measures and other solutions are not working. However, he believes the bank is halfway through a 10-year rehabilitation process, implying the legacy bad loans will take another five years to fix. This may be true, but it is a hell of a big final hurdle.
Close to two-thirds of PTSB's home loan book is weighted towards low return tracker mortgages, which up until two years ago were losing €75m per year.
According to Jeremy, investors have adopted a 180-degree turn on the back book over the last six months now seeing it as an "attractive long term play on the interest rate curve". Maybe, but investors are not piling into the stock on the back of it, given that PTSB shares were trading at €2.77 six months ago, but are now around €2.15.
He believes more competition in the mortgage market "would be dangerous". Does that mean, after all that happened in the housing boom/bust, banks still cannot be trusted to behave responsibly? Finally, the bank executive does not appear to have mentioned the €140m set aside by PTSB for the tracker mortgage scandal, through which over a thousand people were put on the wrong rate and 61 PTSB customers lost their homes having wrongly been denied tracker rates.
Seen in the round Jeremy Masding has some interesting things to get off his chest and he has, in fairness, been generally very upfront about what he thinks. He won't be thanked for it in government circles.
The most fundamental point he raises is that nearly a decade after the crash, billions in non-performing loans, on all of the banks' balance sheets have not been fully resolved. When it comes to mortgages things are about to get nastier as loans are sold off to funds or worked through with a lot more house repossessions.
Perhaps Jeremy knows full well how this will play to an Irish audience especially when a minority government controls 75pc of the equity in the bank and will find it very difficult to stand by what many bankers and investors believe has to be done. He would like to see a mortgage Nama but must realise it isn't going to happen. Masding has been battling for PTSB for five years now, but the fight may be about to get into the hand-to-hand stage.
Good news for the Irish Stock Exchange with speculation that US private equity giant Oaktree Capital Management is to launch a €350m IPO of a new house building company. It seems house building is the new gold rush. Oaktree will want to follow in the footsteps of Cairn Homes whose founding shareholders have done extremely well since it was floated.
Oaktree may see the IPO as a chance to maximise the potential of its land bank, bought in the crisis, without exposing too much of its own capital in the process.
A listed home builder would also provide a highly liquid vehicle for Oaktree to gradually sell down its stake over time. In the current climate, it should have no difficulty finding investors who want a slice of this market.
Although the valuations Oaktree places on its assets in the prospectus will be interesting to read, especially when compared with what it paid. Yet, it makes it all the more ironic that some Irish developers say they cannot or will not build on sites because they cannot make a decent profit at current prices. And that is why we have a state funded Help-To-Buy scheme. Surely some mistake!
AIB has abandoned plans to move up to 100 previously outsourced IT jobs to India. An Irish Times report said it decided such a move would be too risky in the current environment. Foreign Direct Investment into India has slowed this year after a record 2016. Regulatory changes and the government's decision to scrap 86pc of rupee banknotes have played a part. Trump's America first plan, clamping down on hi-tech H1-B visas, is not playing well with India's IT services sector, India's largest private sector employer.
Of the $116bn the country earned in revenue during the 2016-17 financial year from IT services exports, 62pc came from America. India's Congress has changed its services taxes and even scrapped bilateral investment treaties with 58 trading partners, preparing the ground for a new system to give Indian courts priority over international arbitration in investment dispute settlement.