Liams Last Post : Anglo gets split as financial system remains under pressure and CPL report inflection in recruitment in Ireland.

Good Afternoon ,

 

The day opened with a quasy sense of forboding in Ireland with a real crisis looming re the markets perception of Ireland close to turning to panic. One London based Institution talked to me about Greece exiting the Euro and the consequent knock on impact for Ireland being an almost certain exit for Ireland also.  The news of he National bank of Greece announcing that it was planning to bolster its capital just added to the pressure on Ireland. The National Bank of Greece carries its Greek sovereign bonds on its books at a discount to par and the rumour was that it was raising capital ahead of an almost certain haircut on the value of Greek bonds. The read across to Ireland was immediate and the Irish bank stocks sunk like torpedoed boats… in fairness Bank of Ireland management have been on a roadshow in the UK and made a positive impression so when we did see some buying from those who took a more positive and considered view of Ireland rather than the panic which was setting in.

 

The news of the Anglo split when it came was received positively with irish Bond spreads narrowing somewhat.The spread over bunds is as near as dammit 400bp so it is not as if we are in safe territory …

 

The Government announced its plans to split Anglo into a Funding Bank (holding the deposits) which will continue as a regulated bank and a Recovery Bank to hold the residual assets and realise them over time.

Our very initial reactions are that there are potential Negatives such as the market will have no greater certainty over the potential liability the State faces due to the capital deficit at Anglo and the creation of a State owned deposit bank competitor for remaining market participants could distort competition (something the EU wants to avoid).

On the Positive side, by isolating the liabilities/deposits from the assets, the overall residual capital requirement for Anglo Funding Bank might be reduced.  The Government might also have greater ability to backfill the capital deficit of Anglo Recovery Bank over time. Also if the depositors of Anglo are isolated from the insolvency risk of Anglo, Anglo might be able to cut its deposit rates (we suspect the EU will have some say over market shares, pricing etc that can be supported by the "Funding Bank"), which could be a positive for the Irish market.

CPL reported full year profit before tax of €5.3 million and net cash of €43.5 million in the year to June 2010 on sales of Eur189.9m. The numbers were in line with expectations as the company had issued a preclose statement in July. The dividend declared is 4.0c. The most interesting thing was the significant pick up in permanent placement fees +28% and in Temp fees wich were 14% hiher but subject to significant pricing pressure in the Healthcare sector in Ireland. CPL say they are gaining share but noted that the HSE was being very aggressive with pricing. Also talking to the FD they had strong progression in July and August but are reluctant to get too excited about it with all the negative noise in the system.

It is interesting that yet another domestic focussed company has reported genuine signs of a turnaround in Ireland … lets hope that this continues and the financial tsunami does not blow the whole place apart.

Have a good evening

Liam

 

 

 

 

 

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Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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