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ICC sale is close

by Colette Keane
THE sale of State bank ICC took a step closer to completion yesterday with Minister McCreevy's appointment of ABN AMRO Corporate Finance and McCann Fitzgerald as his advisors on the sale.
ICC is the first of the State banks to be put on the market and the Minister's appointments follows ICC's own announcement in December that it had appointed HSBC Investment Bank as their advisors on the sale process.
Over the past five years ICC Bank has delivered significant increases in profits, and last week the bank announced its most profitable year with all divisions exceeding their targets. The reporting of £21 million profit in 1998 merely bolsters expectations that the sale could generate between £200-£300 million in additional revenue for the coffers of the Exchequer.
Since the first announcement in July 1998 that the Minister was putting ICC Bank on the market, those tipped as potential bidders for the niche bank, which provides a broad range of financial services to small and medium sized Irish business, have changed little.
Among the top contenders for ICC Bank, which only last week announced record profits of £21 million for 1998, is Bank of Ireland, who has the scale to digest ICC's 300 strong staff without too much difficulty.
ICC's recognised strength in the small and medium sized business sector makes it a very attractive buy for Bank of Ireland, who have been keen for some years to expand in this area where they have been consistently losing out to AIB.However, there are fears that the Government might be unhappy with a bid from Bank of Ireland in light of increasing deregulation, and especially if they are keen to achieve increased competition in the banking sector. Anglo Irish Bank has also been hotly tipped as a contender for ICC as the take-over would capitalise on Anglo's own strength in the Irish business sector. Anglo Irish have countered talk that they may have difficulty in absorbing ICC's staff by pointing to the fact that they have doubled their workforce to 310 over the last five years and are continuing to recruit.
Irish Intercontinental is also believed to be a potential bidder for ICC, but its name has not been tied with the sell-off in recent times. Non-national banks are unlikely to be interested in ICC due to its small market niche.
The ICC board is on record as saying that proposals for the future development of the bank are as important as the cash terms offer. Potential buyers will also have to bear in mind Minister McCreevy's safeguarding of the jobs of ICC staff and a staff shareholder deal.Managing Director of ICC Bank Michael Quinn last week refused to comment on the sale process, only saying that it was "moving along."
However, while he would not be drawn on question or details surrounding the sale, he was confident that an agreement might be reached by July 1999.

Insurance firms feeling strain after pension move

by Brian O'Mahony
LIFE insurance companies could lose several billion pounds of investments as a consequence of the planned dramatic changes in personal pensions.
With thousands free to shift their lump sum savings into any investment vehicle of their choice, the insurance companies will have to fight back.For years they were strong advocates of the annuity option for those on personal pension plans.
Paul O'Faherty said this wasn't as bad as has been suggested, although returns were low.
Primarily they were a hedge against any serious swings and roundabouts in currency or stock market swings.
But they were low margin and the insurance sector would do significantly better offering newly constituted investment packages to suit the new environment, O'Faherty said.What is lost one way can be regained another, he said.Meanwhile Joe Byrne, of Coyle Hamilton, who specialises in pensions, says the major concern was the diminishing level of return from annuities.
Like O'Faherty he agreed it was time for change. His suggestions include:
• deferral of annuity purchase
• purchase of temporary annuities
• life style funds.
Those three options give the retiree more flexibility and better investment options as well.Deferring the annuity up to age 75 would allow pensioners leave their funds fully invested for longer.
This would give them greater flexibility and remove the pressure of being able to pick the best day to buy into the mechanism.
Allowing temporary annuities to be bought for the first five years would also allow flexibility and remove pressure to make the big decision at the very start, said Mr Byrne.
This would be equivalent to a cash or gilt fund with full capital return.
"This approach is unlikely to improve the retirement income but gives greater freedom of choice," he said.Such an arrangement may be appropriate for those in bad health and where capital protection is paramount.
In the case of lifestyle funds a kitemarked plan automatically switches from equity type investments into gilt investments before retirement, offering additional protection.
In the final analysis, Mr Byrne said shifting out of annuities is an option only for those with big sums to invest.
It would not be appropriate to put smaller sums into higher risk packages.
Pensions or those reaching retirement age need to be much better informed on how annuities work before making any hasty decisions, he said.

Bank gears up for euro stockpile nightmare

by John O'Mahony
THE Central Bank is preparing itself for a logistical nightmare as Ireland gears up for the introduction of the single currency.
The first euro coins will be begin production in late June, with 1.1 billion units of new currency coming into circulation in January 2002. The new notes and coins will be stockpiled in advance of the launch date and present the single biggest challenge to the currency centre in Dublin since the formation of the state.
An average of 530 million new coins will be produced annually to meet expected demand over the next two years, representing a 300% increasing in current volume.
Work on 150 million euro notes begins next year, with an additional 160 million Irish notes also hitting production lines.
The Central Bank currently prints 180 million coins and 160m notes each year. Fifty-one million £20 notes are printed annually, with 36m tenners, 36m fivers and 10m £50 notes coming into circulation.
Of the 180m coins produced each year, pennies make up the biggest single lot, totalling on average 65m a year. Forty-six million 5p coins, 18m 2p coins, 20m 10p coins and 17m 20p coins are also produced.

Pension reforms could lead to chaos

by Brian O'Mahony
PENSION reform could lead to pension chaos and cost billions of pounds to rectify in the future.
This followed the reforms in the UK as pensioners drew down their nest eggs too fast or were miss-sold investment products by unscrupulous finance companies. The same scenario is staring us in the face warned a top pensions expert last night.
Paul O'Faherty, chairman, Irish Association of Pension Funds, said Finance Minister Charlie McCreevy, has adopted a high risk strategy in the radical pension reforms announced in this year's Finance Bill. Under the new rules pensioners risk blowing all their savings years before they die.
Dangers exist also that people will get involved in investments that will seriously jeopardise their meticulous pre-retirement financial plans.
This happened to a dramatic degree in the UK. It is taking billions of pounds to mop up the mess and we risk similar disasters under the proposed pension reforms outlined on Thursday by Minister McCreevy, said O'Faherty.
Minister McCreevy dismissed industry fears as over the top.
It is highly unlikely that those who saved meticulously over 20, 30 or 40 years for their old age will suddenly go mad because responsibility for their future has been given back to them.
This negative view isn't borne out by previous behaviour, said the Minister.
The evidence simply doesn't stack up.
Maybe five out of 100 will blow their money, but that is no argument for freeing people from the bind the insurance had them in, said the Minister.

Ryanair in stinging attack on airport costs

by Colette Keane
BOTH Aer Rianta and Aer Lingus refused to be drawn on Ryanair's attack on the government owned airport monopoly and high landing charges.
Ryanair again blamed Dublin's high airport costs for the loss of 15 European Ryanair routes, all of which operate from the UK to continental Europe.
According to Ryanair, they could easily have opened these routes from Dublin, but used the UK as a base following Aer Rianta's decision to almost double landing charges in June 1999.
The group said very few of the routes announced by Aer Rianta on Wednesday consist of charter flights and do nothing for Irish tourism.
"It is now clear Aer Rianta's excessive charges and monopoly preservation have cost Dublin 15 low fare scheduled services to Europe, accounting for an estimated 2 million passengers alone," CEO of Ryanair Michael O'Leary said.
While Aer Rianta declined to answer these charges for the third time this week, a spokesperson did add that the new routes from Dublin airport to destinations such as Prague, Faro, Lisbon, Tunis, Thailand and Egypt, were meeting a particular public demand.
Mr O'Leary also claimed, in a prepared statement, that Aer Lingus had confirmed that even their new Los Angeles service would have been reviewed had they been aware of Aer Rianta's intention to increase charges.
A spokesperson for Aer Lingus said he was unwilling to comment on another airline's business.
However, he said Aer Lingus was, like all airlines, in favour of lower airport charges — not just in Ireland — but in every country.
Ryanair's Mr O'Leary called for deregulation and also claimed that without expansion of capacity on the route network of Ryanair and Aer Lingus at Dublin Airport this year, the future for traffic and tourism growth on short-haul routes from the UK or Europe is bleak.

Harney urged to call in Task Force after job losses

by John Murphy
IN the wake of the shock announcement last week that 135 jobs will be lost with the closure of the Scheisser plant in Clonmel, there is now mounting pressure on the Tanaiste, Mary Harney, to reinstate the Task Force that was disbanded after Guidant Corporation was secured as a replacement industry for the Seagate plant, which closed with the loss of almost 1,400 jobs.
The pressure on the Taniaste is set to intensify with the confirmation that Clonmel is poised to lose more jobs in the coming months.
Local trade union sources have disclosed that the Showerings drinks manufacturing company is seeking up to 30 voluntary redundancies because of the introduction of new hi-tech production line equipment at its ultra modern plant.
Meanwhile the Avonmore Waterford Group's milk processing and packaging plant at Suir Island on the outskirts of the town closed this week with the loss of 30 jobs.
Once the merger between Avonmore Foods and Waterford Foods plc became reality in late 1997 the Clonmel operation was one of a number nationwide earmarked for closure in a major rationalisation plant designed to reduce the Irish workforce by 750.
Initially there had been strong trade union opposition to the proposed closedown, but it has been achieved through the acceptance of a voluntary redundancy package by the workers — just as the closure late last year of another milk processing plant in Dungarvan with the loss of up to 180 jobs — was.
Meanwhile seven employees at the Bolger Transport Co. at Cashel Road, Clonmel, have also lost their jobs in recent days. The company, which has facilities in Cork and Kerry, is about to set up in Limerick, and a spokesman said it is this expansion of the business that has forced the job losses in Clonmel which will, however, remain the company's headquarters.

Next Week

MONDAY: MINISTER for Finance Charlie McCreevy launches the Drinks Industry Group's most recent research publication "The Drinks Industry in Ireland, A Substantial National Asset."
TUESDAY: CLONDALKIN Group announce their preliminary results for the year ended 1998 from the Board Room of the Westbury Hotel in Dublin.
WEDNESDAY: THE Minister for Education Micháel Martin launches the 1999 Hewlett-Packard Award at a conference in the Merrion Hotel.
THURSDAY: A RECEPTION to launch Portal Glazed Structures Limited in Ireland takes place in The Shelbourne Hotel in Dublin.
FRIDAY: IRISH Permanent hold extraordinary general meeting at Jurys Hotel, Dublin. Irish Permanent and Dunloe Ewart hold their EGMs.