Finance news. My opinion.

The Irish government may be forced to take controlling stakes in Bank of Ireland Plc and Irish Life & Permanent Plc, the last of the country’s biggest lenders to escape state control, following tomorrow’s stress tests.

“They’ve clearly got most to lose,” said Oliver Gilvarry, head of research at Dublin-based Dolmen Securities, who has “sell” rating on both banks. “It’s difficult to see how either will end up less than 50 percent owned by taxpayers.”

The Irish Central Bank will at 4:30 p.m. tomorrow publish its third round of stress tests. The results will determine if the two can avoid joining four of the country’s biggest banks in majority state ownership after they all logged record losses as the country’s decade-long real estate bubble burst.

Ireland may require banks to raise an additional 27.5 billion euros ($39 billion) of capital, according to the median estimate of 10 analysts surveyed by Bloomberg News. The government has pledged to provide that money if banks fail to raise it themselves from a 35 billion-euro fund set up under the country’s international bailout in November. Shares of the two lenders have declined by more than 50 percent since that rescue.

Spokesmen at Bank of Ireland and Irish Life declined to comment. Officials at the central bank and Finance Ministry in Dublin also declined to comment.

The government has already taken control of Anglo Irish Bank Corp., Allied Irish Banks Plc (ALBK), EBS Building Society and Irish Nationwide Building Society after injecting 46.3 billion euros into the industry over two years.

“It’s struck me for some time that the bank would find it very difficult avoiding this,” he said. “Still, government control is not necessarily a bad thing as it aligns the interests of government with that of investors in looking to generate a profit cash advances pay day loan.”

Even before the latest stress tests, the regulator ordered Bank of Ireland, already 36 percent state-owned, to raise about 1.4 billion euros, more than its market value of 1.3 billion euros today.

Irish Life, the only government-guaranteed lender to avoid a bailout so far, was ordered to raise 243 million euros in November. That’s now equivalent to twice its market value today.

The Dublin-based company may require more than 1 billion euros to allow its banking unit to operate without support from the company’s life and pension operations, Eamonn Hughes, an analyst with Dublin-based securities firm Goodbody Stockbrokers, said in a note to clients yesterday. The stress tests “may drive this base figure higher again,” he said.

‘Fight Hard’

Both Bank of Ireland and Irish Life, the country’s largest life assurance and pensions company, will “fight hard” to avoid falling under government control, said James Forbes, director of investment solutions at Dublin-based securities firm Bloxham, which manages about 1 billion euros of assets.

“A pragmatic and likely solution would be for the government to give both companies a certain period of time to sell further assets and raise equity, while pledging to support them if they are not successful in raising money privately,” he said.

The previous Irish government had been in talks to acquire non-voting shares in Bank of Ireland, two people with knowledge of the situation said Feb. 4. The securities would convert into stock if the bank failed to raise the same amount in a rights offering to repay the government, they said.

Bank of Ireland was established in 1783. It was appointed official banker to the Irish government when the state became independent from the U.K. in 1922.

“It would be foolish to assume anything other than Bank of Ireland falling under majority state control,” said Brian Lucey, associate professor of finance at Trinity College, Dublin. “If they do avoid that, it’s a signal that the government is low-balling the number.”

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Fashion facts

Money makers

Best street cred

Style file

Toronto-based fashion designer Amanda Lew Kee is only 22, but already runs a successful eponymous brand and is turning a profit.

Not an easy thing to pull off in Toronto.

Britain’s economy shrank more than initially estimated in the fourth quarter, complicating the task of the Bank of England as a split deepens among policy makers on whether to withdraw stimulus.

Gross domestic product fell 0.6 percent from the previous three months, compared with an initial estimate for a 0.5 percent drop, the Office for National Statistics said today in London. The statistics office said its “best estimate” for the impact of cold weather on the data remains 0.5 percent. The slump was led by construction and investment.

The coldest December in a century hampered the recovery, dragging the economy to its worst performance in more than a year. The Bank of England kept its key interest rate on hold this month as inflation at twice the 2 percent target led to a four-way split among officials. Recent surveys suggest the contraction may have been a temporary setback, with services resuming growth in January and manufacturing strengthening.

“There has been a significant slowdown in the economy, even outside of weather effects at end of last year,” said James Shugg, the Westpac Banking Corp. economist who was the only economist in the Bloomberg News survey to correctly predict the a downward revision. “I’m still pretty cautious about the U.K.” and “at the margin this adds to the case for a bit of caution on the rate side.”

Pound Drops

The pound fell as much as 0.4 percent to $1.6069 today. It remained lower against the dollar after data showed the U.S. economy grew slower than previously calculated in the fourth quarter. It traded at $1.6090 as of 1:53 p.m. The yield on the 10-year government bond was up 1 basis point at 3.63 percent.

Figures from the Commerce Department in Washington showed that the world’s largest economy grew at a 2.8 percent annual rate in the fourth quarter, compared with a 3.2 percent estimate issued last month. The euro-area economy expanded 0.3 percent in the period, a report earlier this month showed, less than the 0.4 percent pace forecast by economists.

In the U.K., consumer-spending growth fell 0.1 percent in the fourth quarter from the previous three months, its first decline since the second quarter of 2009. Government spending rose 0.7 percent on the quarter, the statistics office said.

Investment dropped 2.5 percent, while construction output also fell by that amount. Exports rose 2.3 percent and imports increased 3 percent.

‘Disappointing’

Chancellor of the Exchequer George Osborne said the U.K. data were “disappointing and today’s revision doesn’t change that fact,” the U.K. Treasury said in an e-mailed statement. “It also doesn’t change the need to deal with the nation’s credit card — the country is borrowing more this year than is spent on the entire National Health Service.”

The statistics office said the downward revision to quarterly GDP was due to data on industrial production, services and retail sales. The annual GDP deflator was 2.8 percent. From a year earlier, the economy grew 1.5 percent.

Dechra Pharmaceuticals Plc, a U.K. veterinary drugs and services company, said on Feb. 22 that first-half profit fell after taking a charge for two acquisitions and adverse weather in the U.K.

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News and information provider Thomson Reuters says fourth-quarter earnings climbed 24 percent from a year ago, as revenue grew for the second consecutive quarter.

Thomson Reuters Corp. was under pressure in 2009 as the financial companies and law firms that subscribe to its services cut spending and shed workers during the recession.

Now, an improving economy and new services are lifting results. The company says it earned $225 million, or 27 cents per share, in the fourth quarter, up from $182 million, or 21 cents per share, a year earlier.

Excluding special items, the company says it earned 43 cents per share. On that basis, analysts surveyed by FactSet expected earnings of 46 cents per share.

Revenue climbed 3 percent to $3.46 billion, while analysts expected $3.44 billion.

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Rain and gusts from a weakening cyclone continued to bluster across northeastern Australia on Friday as those caught in the eye of the storm salvaged belongings from wrecked homes and officials confirmed the first death.

Police said a 23-year-old man asphyxiated due to fumes from a diesel-powered generator he was using in a closed room as he sheltered from Cyclone Yasi. Authorities were also searching for two people missing more than 24 hours after the storm struck.

The storm, which hit in the early hours of Thursday, was among the most powerful ever to strike Australia, terrifying thousands of residents and causing widespread damage _ though it was not as bad as had been feared.

Power was gradually being restored to stricken towns, and airports in regional centers were reopening. Cleanup teams with chain saws and other equipment were clearing roads. Residents were piling up roofing sheets and debris torn free by the storm, and mopping up homes doused by torrential rains.

Many were still reliving a night of terror.

David Leger recalled the terrifying roar, then a violent bang like something had exploded.

“We gotta go!” David Leger screamed to his father as the cyclone tore the roof off their home, sucking the air up and out of the room like a vacuum.

Leger and his parents scrambled down the staircase, but the house shook violently, sending 83-year-old Francis Leger tumbling down the stairs. The family finally made it to a small room on the ground floor, where they rode out the ferocious storm that slammed into the already flood-ravaged Queensland state.

“We’re just thankful,” David Leger said later as he slogged across the drenched carpet of their ruined home, water pooling around his sandaled feet. “This is only material.”

Residents and officials were amazed that the death toll was not higher. The storm whipped the coast with up to 170 mph (280 kph) winds and sent waves crashing ashore two blocks into seaside communities. Several small towns directly under Yasi’s eye were devastated and hundreds of millions of dollars of banana and sugarcane crops were shredded.

Officials said lives were spared because, after days of increasingly dire warnings, people followed instructions to flee to evacuation centers or bunker themselves at home in dozens of cities and towns in Yasi’s path.

Hundreds of houses were destroyed or seriously damaged, and the homes of thousands more people would be barely livable until the wreckage was cleared, officials said. Piles of drenched mattresses, sodden stuffed animals, shattered glass and twisted metal roofs lay strewn across lawns in the hardest-hit towns.

The region is considered a tourist gateway to the Great Barrier Reef, but whether the storm caused damage to the reef was not yet known. Experts say that cyclones can cause localized reef damage as they cross over and that under normal circumstances they will recover.

The storm was again downgraded Friday to below cyclone level, but the Bureau of Meteorology warned that it still bore potentially damaging winds of more than 56 mph (90kph) and severe thunderstorms could cause flash flooding.

Prime Minister Julia Gillard said she hoped to offer some comfort to victims while touring the storm-tossed region Friday.

“I would prefer that my visit to Queensland was for other purposes but we’re here because nature’s been continuing to throw challenges to Queensland,” she said.

The disaster zone was north of Australia’s worst flooding in decades, which swamped an area in Queensland the size and Germany and France combined and killed 35 people during weeks of high water until last month.

But the storm added to the state’s woes, and was sure to add substantially to the estimated $5.6 billion in damage since late November. The government has already announced a special tax nationwide to help pay for the earlier flooding.

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Millions of jobless Americans are no doubt cheering the tax cut deal that President Obama signed into law Friday.

The legislation provides for 13 more months to apply for extended jobless benefits, but not everyone who’s unemployed will be eligible for these extended benefits.

In fact, residents in at least five states won’t have access to the same level of unemployment benefits as their peers nationwide.

That’s because the unemployment rate in those states is improving, so, according to federal law, the jobless there can’t receive checks for as long as those in harder-hit states.

Take Vermont. Only a few months ago, unemployed Vermont residents could collect up to 86 weeks of jobless benefits.

Now, they are eligible for only up to 60 weeks.

The reason is that Vermont’s unemployment rate has dropped below 6%. Good news for those lucky enough to find work, but small consolation to the jobless still looking for a position.

Here’s how the system works: The jobless collect up to 26 weeks of state benefits before shifting to the extended federal program. Federal benefits consist of up to 53 weeks of emergency compensation, which is divided into four tiers, and up to another 20 weeks of extended benefits. The maximum is 99 weeks.

But not everyone can collect benefits for that long. Extended benefits, as well as the last two tiers of emergency compensation, are tied to state unemployment rates. So as their state job picture brightens, the jobless stop qualifying for long-term benefits.

To be eligible for the fourth tier of emergency benefits, which last up to six weeks, the average state’s unemployment rate must be above 8.5% for three months. Similarly, states lose their eligibility for the third tier of benefits, which last up to 13 weeks, if their rate falls below 6%. Extended benefits have a more complicated formula tied to different gauges of unemployment.

There’s a logic to the system: "If the unemployment rate in a state is 6% versus 10%, one can argue you’ll have a better time finding a job," said Richard Hobbie, executive director for the National Association of State Workforce Agencies.

In recent months, those out of work in New Hampshire and Vermont have lost both Tier 3 and extended benefits because the state unemployment rates have fallen to 5.4% and 5.7%, respectively.

Meanwhile, residents of Alaska, Delaware and Massachusetts can no longer receive Tier 4 benefits since their rates are all below 8.5%.

Those in the midst of a tier can continue to collect benefits until they exhaust that tier, but they cannot advance to the next level. This does not sit well with those who cannot find a job.

"It can feel rather arbitrary to certain people," said Andrew Stettner, deputy director of the law project.

Just how long federal jobless benefits should continue was the subject of much debate when Congress was considering the 13-month extension contained in the tax-cut deal. The federal government has already paid out $109 billion in unemployment insurance during this recession.

Those that had opposed continuing benefits say another extension would be too expensive and would dissuade people from finding jobs.

Advocates argue that the safety net has always existed during periods of high national unemployment. The Obama administration echoes their position, saying that people will naturally fall off the rolls as state unemployment rates improve.

"As your unemployment rate goes below various thresholds, the extension itself phases down and the weeks shorten," said Austan Goolsbee, chairman of the president’s Council of Economic Advisers. It "should be determined at the state level, not at the national level." 

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Inventories held by U.S. businesses rose for a 10th consecutive month in October as companies saw sales increase by the largest amount in seven months.

Business inventories increased 0.7 percent in October after a revised 1.3 percent rise in September, the Commerce Department reported Tuesday. October sales jumped 1.4 percent, the biggest advance since a 2.5 percent rise in March.

Continued strong gains in inventories and sales are viewed as encouraging signs for the economy.

Many businesses had undertaken a massive liquidation of inventories in early 2009 as they struggled to keep costs under control during the recession. The swing from slashing inventories to rebuilding stockpiles has provided support for growth beginning in the final three months of 2009 _ just months after the recession officially ended in June 2009.

For October, the 0.7 percent rise in total inventories reflected a 0.9 percent increase in inventories held by manufacturers and a 1 payday lenders.9 percent rise in inventories held by wholesalers. Inventories at the retail level dropped 0.6 percent, but that mostly because of a strong month for auto sales.

The 1.4 percent rise in sales showed strength at all points in the supply chain. Sales by manufacturers rose 2.2 percent with smaller gains posted by retailers and manufacturers. A separate report Tuesday showed that retail sales increased sharply in November.

Total inventories climbed to $1.42 trillion in November, increasing 7.5 percent from the lowpoint for stockpiles of $1.32 trillion reached in September of 2009.

The ratio of inventories to sales stood at 1.27 in October. That means it would take 1.27 months to deplete stockpiles at the October sales pace. That was down from 1.28 months in September.

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When Macy’s Inc. closed its Midwest headquarters in downtown St. Louis a couple years ago, it left tens of thousands of square feet of office space vacant in the city’s historic Railway Exchange Building low fee pay day loans.

Now an effort is underway to convert some of that space into a fashion incubator. The details are still being hammered out

As the heavily armed Nigerian soldiers slipped closer to a suspected militant camp in the country’s oil-rich southern delta, they were ready for a fight after suffering casualties only days earlier.

They launched a massive attack, including aerial bombings, that was aimed at finding a wanted militant. Civilians caught in the middle tried to escape with their lives, human rights activists say.

As many as 150 people died in the fighting Wednesday and subsequent raids around Ayakoromor, a village lacking mobile phone reception and only accessible via the Niger Delta’s maze of winding creeks, activists say. However, the military says it fired only after being fired upon.

Still, the violence represents yet another example of how those toiling in poverty in a region that makes billions for Nigeria find themselves caught between a military seeking revenge and power-hungry militants.

“In this country, we have only two classes of being,” said Casely Omon-Irabor, a lawyer representing the hunted militant John Togo. “The oppressed and the oppressor.”

The attack around Ayakoromor, a small village in Delta state, included heavy machine gun blasts from Navy vessels and bombing runs by military aircraft. However, the region’s main military commander in the fight against militants denied Saturday that any civilians died in the recent assaults, while acknowledging soldiers opened fire on the shoreline of the civilian village after reportedly being shot at.

“We were taken aback by the volume of fire that was brought to bear on the troops when we approached Ayakoromor on the way to John Togo’s camp,” Gen. Charles Omoregie told journalists at a news conference. “Soldiers had to fight their way into the camp.”

Omoregie said homes in the village burned after ricocheting rifle rounds exploded gasoline and kerosene canisters.

Those with family in the village, like engineer Yeigagha Henry, offered a different account. Residents able to escape the village told him his 76-year-old father died at the hands of the soldiers.

“They set the house ablaze,” Henry calmly recounted Saturday in the nearby city of Okwagbe. “He died inside.”

A list compiled by Oghebejabor Ikim, national coordinator for the Warri-based Forum of Justice and Human Rights Defense, identified 18 of the dead. Ikim said residents told him that soldiers burned down the local customary court and a maternity ward, as well as many homes in the area.

Access to Ayakoromor remained tightly controlled by the military Saturday. Officials with the Nigerian Red Cross made it inside, but a military commander blocked two journalists working for The Associated Press from entering the village, citing a security risk.

Violence in the area also may be continuing. Soldiers manning a boat landing in Okwagbe speaking in the Hausa language said someone suffered injuries Saturday. A commander ordered guards to avoid bringing the injured person past waiting journalists.

Militant and military attacks are nothing new to the Niger Delta, a region of creeks and mangroves about the size of South Carolina. The attacks from an insurgency that began in 2006 cut drastically into crude production in Nigeria, an OPEC-member nation that is one of the top suppliers of crude oil to the U.S.

Production has risen back to 2.2 million barrels of oil a day, in part because many militant leaders and fighters accepted a government-sponsored amnesty deal last year.

But as militants over the years profit from kidnapping and oil theft, the military has launched several reprisal massacres against villages. Often, civilians find themselves caught in the middle of a war over oil they never profit from.

Instead, they eek out a living in petty trading, fishing and subsidence farming as their children attend classes in rundown schools with rusting corrugated roofs and clinic cabinets remain barren of needed anti-malaria drugs.

“What they get as the dividends of democracy, what they get as part of oil revenue is human slaughter,” said Anyakwee Nsirimovu, the executive director of the Institute for Human Rights and Humanitarian Law in Port Harcourt. “It’s unacceptable and I think children and young people who watch their parents die and their houses get burned down will find a way of fighting back.”

Meanwhile, both militants and the military find it lucrative for violence to continue _ especially when it comes to the large-scale oil theft that plagues the foreign oil firms working in the region. That stolen crude, easily refined, fetches top dollar on the black market. But in order for the oil to leave the country, security agencies patrolling the delta must let container ships slip away unstopped.

Between oil theft, amnesty program cash payouts and additional combat pay offered to soldiers in the region, Nsirimovu said only the civilians get left out _ until the violence comes.

“People who profit from the violence in the Niger Delta would not want that violence to end,” he said.

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Australian credit unions and building societies can be a “strong competitive force” against banks, helping to cut borrowing costs, Treasurer Wayne Swan said in his weekly economic note.

The government wants a “new pillar,” in the industry, Swan said earlier in an interview yesterday with Channel Nine. Commonwealth Bank of Australia, Westpac Banking Corp., Australia & New Zealand Banking Group Ltd., and National Australia Bank Ltd., dubbed the four pillars after a law preventing takeovers among them, accounted for 87 percent of the home lending market in September, up from 76 percent three years ago.

“We know there is more work to be done to build up competition, and we are determined to do that,” Swan wrote in his note yesterday. “I’m also a really big believer in the capacity of our mutual credit unions and building societies to be a strong competitive force in the banking sector.”

Australia’s biggest banks have been criticized for raising borrowing costs by more than the central bank. Swan said his government’s package to encourage competition will be released next month. Opposition Shadow Treasurer Joe Hockey will call for a review of the banking industry today, he said in an interview with the Australian Broadcasting Corp yesterday.

The Greens Party on Nov. 15 introduced draft laws to place restraints on the ability of the big banks to increase mortgage rates. The proposals in the lower house of parliament would give the Australian Prudential Regulatory Authority powers to prevent banks from raising mortgage fees above their funding costs.

‘Silver Bullet’

Finance Minister Penny Wong ruled out regulation and said the government will instead focus on supporting competition, according to the transcript of a Sky News interview.

“We’re not pretending that there’s a silver bullet,” Wong said. “We’re not going to re-introduce regulatory regimes, which historically we know have made things worse for Australian consumers and people trying to get home loans.”

Swan urged borrowers to seek loans from credit unions, building societies and smaller banks, which offer more competitive rates. He said the nation’s biggest banks act in an “arrogant way.”

“The government is determined to see a new pillar in the banking system, particularly based on the mutual sector, particularly based on our credit unions and our building societies,” Swan told Channel Nine yesterday. “They are safe and they’re very competitive.”

Competitive Forces

The government has invested A$16 billion ($15.8 billion) in Triple-A rated residential mortgage-backed securities to support smaller lenders and lower the cost of funding, Swan said in his economic note.

Commonwealth Bank reported on Nov. 15 a first-quarter unaudited cash profit of about A$1.6 billion. Westpac, Australia’s second-largest bank, earlier this month posted second-half profit that almost tripled from a year earlier, while ANZ Bank said a week earlier that earnings in the period surged 69 percent to a record. National Australia, the biggest lender to companies, posted a cash profit gain of 32 percent in the second half.

All four raised their standard variable mortgage rates by more than the Nov. 2 quarter-percentage point move by the central bank.

Australia’s Senate voted last month to hold an inquiry into competition in the banking industry, including the fees they charge.

ANZ Chief Executive Officer Mike Smith said Oct. 31 that any attempt by lawmakers to control banks’ interest rates will take Australia back to an era “long since gone.”

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