Syndicated News Archives - Kelly Rahill Accountants

Oil prices fall despite tighter global supply

Oil prices fall despite tighter global supply

Oil prices fell yesterday, dragged down by concerns about global economic growth as the US-China trade dispute rumbled on, but receiving some support from tightened supply.

International Brent crude oil futures were at $67.35 a barrel at lunchtime in London, down 26 cents, or 0.38pc.

US West Texas Intermediate (WTI) crude futures were at $58.43 per barrel, down 60 cents, or 1.02pc.

An eight-month trade war between China and the United States has worried global markets already concerned by signs of a slowdown in economic growth this year.

But there have been mixed signals that the standoff between the world’s top two economies can soon be resolved.

A Bloomberg report on Tuesday, citing concern among US officials that China is pushing back on American demands, briefly weakened oil prices before both benchmarks again approached four-month highs.

However, Washington announced that Treasury Secretary Steven Mnuchin plans to travel to China next week for another round of trade talks with senior Chinese officials.

“US-China trade talks continue to present a binary risk for the oil market and other risky assets,” BNP Paribas strategist Harry Tchilinguirian told the Reuters Global Oil Forum.

“A trade agreement is likely to boost oil prices above current forecasts whereas failure can lead to the type of sell-off we saw last December.”

Analysts said an economic slowdown could soon dent fuel consumption, holding back crude.

“Global growth concerns and ongoing oversupply fears (are) creating headwinds for the commodity,” said Lukman Otunuga, analyst at futures brokerage FXTM.

Asian business confidence held near three-year lows in the first quarter as the US-China trade dispute dragged on, pulling down a global economy that is already on a downward path, a Thomson Reuters/INSEAD survey found.

But crude prices have risen almost a third this year, pushed up by supply cuts among Opec and its allies including Russia, as well as US sanctions against oil exporters Iran and Venezuela.

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New mortgage lending increased to nearly €9bn last year

New mortgage lending increased to nearly €9bn last year

New mortgage lending in the Republic rose by €1 billion to nearly €9 billion last year, according to the Central Bank. This was the largest annual increase since 2009.

However, the annual total remains low by historical standards. Prior to the crash, new mortgage lending hit nearly €40 billion.

The latest figures show net lending for principal dwelling houses and buy-to-lets continued to diverge.

Lending for owner-occupier homes increased for the 11th consecutive quarter, with a positive net flow of €1.1 billion over the quarter, representing the largest quarterly increase in lending to that cohort since the series began. Conversely, lending for residential property investment declined by €661 million over the quarter.

Interest-only buy-to-let mortgages shot up at the height of the boom and became a major arrears issue after the economy fell into recession.

Fixed-rate mortgages also increased over the fourth quarter, with new drawdowns exceeding repayments by €1.8 billion.

The figures show household deposits grew by €4.1 billion, or 4.3 per cent, to just over €104 billion in 2018. This was also the largest annual increase since early 2008.

“I think what the figures tell you is that mortgage lending has picked up but is still very low by historical standards,” said Cantor Fitzgerald economist Alan McQuaid.

Strict lending rules
“It is not clear whether this is a supply or a demand issue, but the strict lending rules imposed by the Central Bank and the fact that ‘ordinary’ individuals and couples trying to buy a house are being priced out of the market by cash investors suggests that demand is probably muted.

“This is unlikely to change until more housing supply comes on to the market. However, banks are being restrained too by the tighter regulations imposed on them by the authorities.”

Mr McQuaid also noted that deposits remained at record high levels despite the ultra-low interest rates.

“This suggests that consumers/households remain cautious and don’t want to be over-exposed in the case of another serious economic downturn like the global financial crisis. Uncertainty over Brexit is probably also a factor here.

“But at the end of the day credit will need to flow at a much stronger level than currently if the economy is to continue to grow strongly over the long-run in a post-Brexit environment, and the housing crisis is to be seriously addressed.”

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Revenue sets sights on value of private shares

Revenue sets sights on value of private shares

Revenue is plotting a crackdown on shareholders of private companies who undervalue their stakes in tax returns.

The rules on valuation apply to all unquoted companies – whether it is a large entity operating on a grey market, or a local sweetshop owned by a company.

Without an open market, one senior accounting industry source said valuing the shares is an art rather than an exact science.

The tax authority is now looking to establish a panel of experts to help it “enhance” its capabilities in assigning values to so-called “unquoted shares”, stakes held in unlisted companies.

“To assist in the full and proper application of the various taxation codes, particularly with regard to the market valuations of private companies, Revenue is seeking to enhance its valuation service in respect of all forms of unquoted shares,” it says in a tender document seeking expressions of interest.

“Revenue is forming a panel of suitably qualified share-valuers. Revenue will select valuers from this panel as required to provide Revenue with independent expert advice in relation to the valuation of unquoted shares,” the document says.

One area where valuations of shares in private companies matter is capital acquisitions tax; for example, when a person inherits a stake in a family business.

Submitting a value for those shares to the taxman is up to each individual, but Revenue has traditionally carried out audits to ensure valuations reflect reality.

It has said the audits are designed to “deter evasion and avoidance by detecting under-valuations and taking appropriate action”.

Multiple factors will be considered in valuations, including whether the shares are part of a majority or minority stake (a reflection of how much influence the shares will have), the profitability of a business, and its future prospects.

A Revenue spokesman said: “It is prudent that Revenue has access to independent valuers for various assets (such as property or shares), so that tax implications of those assets can be assessed correctly. For example, the sale of an asset will potentially raise a Capital Gains Tax liability based on the value of that asset. These panels have been in place for many years, and are refreshed annually.”

The spokesman said the valuers’ role will include providing evidence on Revenue’s behalf before courts and arbitration hearings.

In results for 2018 published earlier this year, Revenue chairman Niall Cody said there had been “continued strong levels of timely, voluntary compliance by taxpayers”.

“The vast majority of individuals and businesses pay the right amount of tax, on time. We support voluntary compliance by making it as easy as possible, and we are focused on optimising our service to taxpayers,” Mr Cody said.

At the same time, Revenue completed 572,785 audit and compliance interventions that yielded €572.6m, settled 22 tax-avoidance cases yielding €5.7m and secured 17 criminal convictions for serious tax evasion and fraud in 2018, Mr Cody added.

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Household debt shrinks to 2003 levels but economic risk remains

Household debt shrinks to 2003 levels but economic risk remains

Even though household and company debt remain high by international standards, they have fallen sharply and may now be in line with the underlying fundamentals of the economy, according to the Department of Finance.

Yesterday’s report did warn that in the event of a downturn the high debt levels could pose a risk to the economy and said debt ratios would remain above European Union risk levels to 2023.

But overall, the picture was one in which borrowing by firms and individuals was consistent with economic growth and income levels.

“After nearly a decade of deleveraging, household debt is on a much more sustainable path,” the department said.

“Using these benchmarks, it appears that Irish debt may in fact be in line with levels predicted by the economy’s underlying fundamentals.”

Household debt has fallen to levels not seen since 2003, well before the economic crisis, at 126pc of disposable income after having peaked following a property and mortgage-fuelled boom that saw the ratio hit a peak of 212pc of disposable income in 2009.

Even so, the ratio is the fourth-highest in the EU and the sixth-highest on a per capita basis, at €29,000 per person. Overall, the core ratio of private debt was 172pc of GNI* (a measure of economic output in Ireland that strips out distortions in the economy) in 2017 with households at 77pc and ‘core’ corporate debt at 95pc of the measure which strips out distortions from the economy.

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Deutsche and Commerzbank consider merger cuts as talks enter endgame

Deutsche and Commerzbank consider merger cuts as talks enter endgame

Deutsche Bank and Commerzbank are now getting down to the finer details of just how a takeover could actually work.

With talks expected to last at least four weeks, there’s a mountain of thorny detail to work through.

Cost cuts – and where to make them – and balance sheet risks are set to take a central role, people with knowledge of the matter said.

The potential for savings, or massive cuts, could be significant as the firms compete in the same markets, have their headquarters in Frankfurt and a large presence in Germany.

Goldman Sachs said in a report in October that similar deals have been able to slash the target’s cost base by as much as 39pc. Savings of that magnitude may also be achievable for Deutsche Bank and Commerzbank, people close to the talks said.

The discussions are open-ended and – as the banks themselves have said – a merger is not a done deal. Here are key questions the talks may focus on:

Where to cut?
As many as 30,000 jobs will be up for discussion. Other options include overlapping branches, as well as call and processing centres. Commerzbank has been pulling back its markets business, recently selling its market-making unit to Societe Generale.

Who is the buyer?
There’s usually no such thing as a merger of equals, and as the bigger of the two, Deutsche Bank is expected to be the dominant force in a deal, one person close to the talks said.

Another scenario would be the creation of a completely new entity that would combine both banks or at least parts of it, another person said. Previous talks in 2016 envisaged Commerzbank merging with Deutsche Bank’s German retail unit, according to a person involved at the time.

Valuation dilemma?
Commerzbank has large holdings of Italian bonds, which may need to be revalued. On the other hand, Deutsche Bank’s US political exposure and the future of its trading unit will be tough questions, too, one person said.

Then there’s the question of goodwill – or the amount the acquirer is willing to overpay to make a deal happen. Typically, that’s an expense, but the banks have the lowest share prices relative to their book values among large European peers. If Commerzbank were bought below its book value, that could lift Deutsche Bank’s capital, according to Goldman.

Cash call or sale?
The banks would probably need several billion euro to pay for the restructuring and revaluations – either by issuing new shares or selling assets. That could lead Deutsche Bank to consider divesting asset manager DWS Group, though the bank is reluctant to do so, according to two people.

Commerzbank could look at business such as internet retail bank comdirect, its Polish subsidiary mBank or its leasing business Commerz Real, said one person. No such action has yet been taken and it’s not clear the bank will, said another person.

Who stays on top?
It’s too early to answer that question, people familiar with the matter said. But one person close to the talks said that, with Deutsche Bank the potential acquirer, a possible scenario would be for chief executive Christian Sewing to keep his CEO role. That would leave the question about the futures of Commerzbank’s management, led by CEO Martin Zielke, who has arguably had more success than Deutsche Bank with his restructuring. Officials for the banks declined to comment.


‘American selfishness on trade’ criticised by EU

‘American selfishness on trade’ criticised by EU

EUROPEAN Commission vice-president Jyrki Katainen said on Tuesday that Washington’s “selfish” approach to trade was not sustainable, but it was too early to say that EU-US trade talks were doomed to fail.

The Trump administration has imposed stiff tariffs on US imports of steel and aluminium and set off a trade war with China in a bid to redress what it sees as unfavourable terms that contribute to a US trade deficit of over half a trillion dollars a year.

The Commission, which negotiates trade agreements on behalf of the 28-nation European Union, has been in talks with US authorities since last July, seeking to clinch a deal on industrial goods trade.

EU governments are now discussing the details of a negotiating mandate for the Commission, while Washington has until mid-May to decide whether to make good on President Donald Trump’s threat to impose tariffs on imports of European cars.

“It is too early to say that our trade discussions are doomed to fail,” Mr Katainen told a regular news briefing.

“There are discussions going on on several levels and… we can end up having some sort of an agreement with the US on trade, but let’s not go deeper than this,” he said.

He added that the scope of negotiations had to be clear and that a deal would require a lot of good will and political capital on both sides.

Asked about a reform of the World Trade Organization (WTO), Mr Katainen said it was problematic.

“Japan, China and the EU are willing to reform the WTO, the US has not been that interested, but they are willing to cooperate,” he said.

“Even though the US authorities may think that selfishness is better than cooperation, it is not a sustainable way of thinking,” he said.


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Banks fight thousands of disputed tracker cases

Banks fight thousands of disputed tracker cases

Thousands of tracker cases continue to be disputed by banks, despite the scandal dragging on for a decade now.

An additional 8,700 cases in three different banks are being disputed by the lenders.

If the banks eventually have to concede on these it will take the total number of tracker cases to almost 50,000, and could see the total bill for the banks rise by another €290m.

That would mean the total bill will be close to €1.3bn.

Newly-appointed AIB CEO Colin Hunt has been urged to add 6,000 customers to its tracker mortgage redress and compensation scheme.

Consumer advocate Brendan Burgess said the AIB customers started on fixed rates but had a contractual right to a tracker at the “prevailing rate” when the fixed-rate period ended. He claims AIB failed to do so. AIB maintains that “the customer grouping in question did not hold a tracker mortgage”. The bank has offered customers €1,600 each because it did not offer them a tracker, but insists they did not lose out. But it has not put them to trackers or refunded them for overpaid interest.

Mr Burgess has urged the customers to use AIB’s independent appeals panel. The deadline was last Friday, but he said appeal applications would still be accepted. Those who do not appeal will lose all legal rights and options and wave goodbye to any chance of getting their tracker back.

He hopes to mount a legal challenge and says a successful appeal could cost AIB up to €200m in additional redress and compensation.

More than 200 current and former staff in Bank of Ireland, who claim they were promised tracker rates, have so far failed to meet the Central Bank to discuss the issue. This is despite staff in the regulator’s office promising to meet them by the end of February.

A spokesman for the group said: “Our main drive is to secure a face-to-face meeting with the Central Bank to fully explain our situation and how this has impacted members.”

BoI, run by Francesca McDonagh, is holding out, despite already restoring some 1,800 other staff and former staff on trackers, refunding them overpaid interest and paying compensation.

And Permanent TSB insists its tracker probe is complete despite claims there are thousands more cases yet to be resolved. It has restored fewer than 2,000 to trackers, refunded overpaid interest and compensated them.

But tracker denial cases authority Padraic Kissane claims there are another 2,500 cases the bank is refusing to concede on, or where people got redress but were put on the wrong tracker margin.

The Central Bank said the vast majority have been identified but it continues to “review and challenge the work undertaken by lenders to ensure all groups of customers who have been impacted are included for redress and compensation”.

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UK jobs growth surges as labour market defies Brexit nerves

UK jobs growth surges as labour market defies Brexit

UK employers increased their hiring at the fastest pace in more than three years in the three months to January as the country’s labour market defied the broader weakness in the overall economy as Brexit approached.

The number of people in work surged by 222,000, helping to push down the unemployment rate to 3.9%, its lowest since the start of 1975, official data showed.

A Reuters poll of economists had pointed to a rise in employment of 120,000.

With the terms of Britain’s exit from the European Union still unclear, many businesses have cut long-term investment in equipment, potentially making them more likely to hire workers who can be sacked if the economy sours.

The strength of the labour market is pushing up wages more quickly.

Total earnings, including bonuses, rose by an annual 3.4% in the three months to January, the Office for National Statistics said, stronger than a median forecast of 3.2% in the Reuters poll.

Wage growth for the three months to December was revised up slightly to 3.5%, its highest since the middle of 2008.

Average weekly earnings, excluding bonuses, also rose by 3.4% on the year, in line with the Reuters poll.

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Taoiseach hosts talks with Tusk as Brexit deal deadline looms

Taoiseach hosts talks with Tusk as Brexit deal deadline looms

Taoiseach Leo Varadkar is meeting European Council President Donald Tusk in Dublin with just ten days left before Brexit, but with no deal in sight.

Mr Tusk and Mr Varadkar shook hands on the steps of Government Buildings, but declined to comment to waiting media.

The meeting comes as British Prime Minister Theresa May considers a shock ruling by the chair of the House of Commons, John Bercow, which precludes her from bringing her Brexit deal back before MPs without substantial changes.

On St Patrick’s Day, the EU’s chief Brexit negotiator, Michel Barnier, tweeted a message to what he called his “Irish friends”, saying Ireland was part of the EU for 40 years and he looked forward to another 40 of peace, prosperity and solidarity.

Mr Tusk will chair the EU leaders’ summit, which begins on Thursday and is the last scheduled gathering before the UK is supposed to leave the EU on 29 March.

It seems likely that Mrs May will seek to extend that Brexit deadline at the meeting, but she requires the unanimous support of the 27 EU prime ministers and presidents.

Her capacity to convince EU leaders she can secure parliamentary backing for any deal has been further undermined by yesterday’s ruling by the chair of the House of Commons Mr Bercow.

And with the whole Brexit process in disarray, Agriculture Minister Michael Creed was in Brussels last night seeking targetted support for farmers in the event of a no-deal Brexit outcome.

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Ireland outpaces EU average again with 6.7pc GDP rise

ECONOMIC growth came in at 6.7pc in 2018, and although it slowed in the second half of last year, Ireland has experienced the most rapid growth of any eurozone country since 2014.

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