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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Retailers reported solid revenue gains for February, extending the strong spending momentum seen during the holiday season as the economic recovery takes hold.

Worries are growing, however, that rising gas prices could sap shoppers’ spending on other items.

Among major retailers reporting their monthly results Thursday, Limited Brands Inc., J.C. Penney Co. and Macy’s Inc. reported gains that beat Wall Street expectations. Luxury retailers including Saks Inc. saw sales surge as the affluent kept spending.

There were a few stragglers. Target Corp. announced an increase slightly below analysts’ projections. And Gap reported a bigger-than-expected drop.

The figures are based on revenue at stores open at least a year and are considered a key indicator of a retailer’s health.

“We’re seeing a continued roll-off from the holidays,” said Laura Gurski, a partner at A. T. Kearney. “There’s disposable income out there. But it’s going to be a long spring.” Low-income shoppers are already feeling pinched by rising prices for food and gasoline, she noted, and that’s only going to trickle up to middle-income consumers.

February started slowly because snowstorms kept some shoppers home, but weather improved throughout the month, helping to perk up sales of spring clothing. Cato Corp. and discounter Fred’s Inc. both said they saw customer counts and sales pick up as shoppers began spending income tax refunds.

The improving economy is also making shoppers feel better about spending. Consumer confidence in February rose to its highest point in more than three years, according to the Conference Board. On Wednesday, payroll processor ADP said private employers added 217,000 jobs last month, well above the 180,000 analysts had predicted. That raised hopes that the government’s employment report Friday could show a decrease in the unemployment rate.

Economists worry that rising prices for gas and other household costs will cause shoppers, particularly the low- to middle-income brackets, to pull back. The national average is now at $3.427 per gallon. Prices will reach $3.50 to $3.75 by spring, some analysts say.

Meanwhile, many retailers, including Macy’s, Kohl’s and J.C. Penney, say that they’re raising prices on clothing as they grapple with soaring costs of raw materials, particularly cotton payday loans in one hour.

March should be particularly difficult because Easter, which is on April 24, is three weeks later than last year. That calendar quirk is expected to shift pre-Easter sales of goods like candy and children’s dresses from March to April, depressing business this month. That’s why analysts look at the two months combined to get a more accurate reading of spring selling.

Target officials last week told investors that it wasn’t depending on a major jolt from the economy to spur consumer spending and instead is relying more on two initiatives to attract shoppers: a 5 percent discount for shoppers paying with their credit or debit cards and its expansion of food. It’s unclear how well that’s working. The discounter posted a 1.8 percent increase in revenue at stores opened at least a year for February. That was below the 2.2 percent estimate from Thomson Reuters.

Target predicts it will see a mid-to upper single digit percentage decline in March, followed by mid-teens increase in April. Combined, Target expects a low-single-digit gain.

Among department stores, Macy’s reported a 5.8 percent increase in revenue at stores opened at least a year, and company officials said that consumer reaction to spring clothing has been encouraging. Analysts had expected a 3.7 percent gain.

J.C. Penney Co. said its revenue at stores opened at least a year rose 6.4 percent, exceeding the 4.2 percent estimate. Kohl’s Corp. enjoyed a 5 percent gain, better than the 4.1 percent increase projected by Wall Street.

Saks’ revenue at stores opened at least a year surged 15.3 percent, well past the 4.9 percent estimate.

Limited Brands posted a 12 percent gain, helped by strong sales at its Bath and Body Works and Victoria’s Secret stores. Analysts polled by Thomson Reuters had expected slower growth of 8.5 percent.

Gap Inc. struggled during the month. The clothing retailer’s figures were down 3 percent, dragged down by declines in all three divisions, its namesake brand, Banana Republic and Old Navy. Analysts had expected a 0.9 percent dip.

Costco on Wednesday reported a 7 percent gain, above the 6.7 percent estimate.

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The world’s strongest economies will find themselves in a new crisis if they fail to address the dangerous imbalances in the world economy, France’s finance minister warned Friday.

But Christine Lagarde also recognized that governments have sought starkly divergent paths out of the financial crisis and their “vested interests” could endanger agreement. She spoke as finance ministers and central bank governors of the Group of 20 industrialized and fastest developing nations gathered for their first meeting this year in Paris.

The status quo of some countries building up huge surpluses while others run steep deficits “leads us straight into the wall of another debt crisis,” Lagarde said at a financial conference that kicks off the G-20 meeting.

The world’s top financial officials hope to draw up a list of indicators that best measure dangerous imbalances in trade deficits, surpluses, budget deficits or levels of debt. Inflation and national savings rates are also likely to be considered as part of the range of possible yardsticks.

“We will focus on how to use those indicators to achieve better collaboration and cooperation,” Lagarde said, adding that the G-20 meeting hosted by France would be about “more stability, less volatility, less excesses, and world governance.”

Lagarde has the difficult task of picking up the pieces of last November’s G-20 summit of heads of state in Seoul, which ended without any meaningful agreement on how to defuse long-standing tensions over trade and currency imbalances.

Her warning of the danger of imbalances was echoed by U.S. Federal Reserve Chairman Ben Bernanke. In the years before the financial meltdown of 2008, countries with trade surpluses plowed money into mortgage and other investments in the United States, helping escalate their value, Bernanke said in his speech at the conference.

The Fed chairman called on surplus countries like China to let their exchange rates float freely, and urged nations like the United States needed to narrow their budget shortfalls and save more.

“If there is no stabilizing system, then you can have situation where like today, you have a two-speed recovery and demand is not optimally allocated around the world,” Bernanke said.

Emerging markets like China and Brazil have emerged from the financial crisis much stronger than some of the more traditional powers such as the U.S, Europe and Japan.

While there is widespread agreement among financial policymakers that smoothing out imbalances is key to getting the global economy back in track, how that should be done is more divisive.

The mere existence of the imbalances points to vastly different growth models among the world’s biggest economies, with each arguing that changing its strategy _ whether based on exports, exchange rate controls, or the free flow of money _ would hurt its recovery.

Officials will not even get to the more difficult question of setting thresholds for these indicators. The even more tricky question of how to enforce any thresholds that leaders eventually sign up to is yet further off the agenda.

“Name and shame” policies like those used in the fight against international tax havens would be one, albeit toothless, possibility.

Lagarde said reducing imbalances will “require cooperation, understanding of each other’s positions and vested interests.” She said the talks on Friday and Saturday should help G-20 members “move from understanding to cooperating and collaborating.” Finance ministers will meet several more times this year before France’s G-20 presidency culminates with a heads of state summit in Cannes in November.

“It’s going to be quite a task, but that’s where we need to go,” Lagarde said

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Prime Minister Nouri al-Maliki will not run for a third term in 2014, an adviser said Saturday, limiting himself in the name of democracy and with an eye on the popular anger directed at governments across the Middle East.

Al-Maliki narrowly held on to a second four-year term after his political bloc fell two seats short of its main rival in national elections last year. He will step down at a fragile time in Iraq’s history _ his successor will be the first Iraqi leader to run the nation without U.S. military help since Saddam Hussein.

Al-Maliki adviser Ali al-Moussawi said the premier also wants to change the Iraqi constitution before he leaves to limit all future prime ministers to two terms.

“Eight years is enough for him, in order to not convert to a dictatorship,” al-Moussawi told The Associated Press, as state TV announced al-Maliki’s decision. “This is the principle and the concept of democracy.”

Saturday’s stunning announcement follows al-Maliki’s decision a day earlier to return half of his annual salary to the government _ a move he said aimed to narrow the wide gap between rich and poor Iraqis.

Al-Maliki is not required to publicly report his pay, but he is believed to earn at least $360,000 annually poor credit personal loans.

The salary cut appeared calculated to insulate al-Maliki from the anti-government unrest spreading across the Middle East, as clerics and protesters warned him not to ignore public bitterness over Iraq’s sagging economy and electricity shortages. The U.S. government estimates that as many as 30 percent of Iraqis are unemployed.

Al-Maliki’s decision to announce he will step down after two terms _ a deadline more than three years away _ appeared fueled by the same desire to shield Iraq from uprisings in Egypt and Tunisia.

But it is particularly surprising, given his drawn-out fight last year to keep his job after his party failed to win the most seats in parliamentary elections last March.

Al-Maliki, a Shiite, remained prime minister only after pulling enough support from allies in closed-door negations and promising to share power with his rival Sunni-based political alliance.

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Strong profits at General Electric sent industrial stocks higher Friday and helped the Dow Jones industrial average notch its eighth straight week of gains.

General Electric Co. gained 7.1 percent, leading the 30 stocks that make up the Dow. The conglomerate’s earnings rose 52 percent on growth in equipment orders and lending.

The company’s results helped send industrial companies in the Standard and Poor’s 500 index up 1.2 percent. 3M Co., another industrial conglomerate, gained 1.4 percent and Textron Inc. rose 2.2 percent.

The Dow rose 49.04 points, or 0.4 percent, to close at 11,871.84.

Bank of America Corp. lost 2 percent, making it the weakest Dow stock. The country’s largest bank reported a $1.6 billion loss in the fourth quarter after setting aside more money to buy back faulty home loans from investors.

The Standard & Poor’s 500 index gained 3.09 points, or 0.2 percent, to 1,283.35. It fell 0.8 percent for the week.

Technology companies in the S&P 500 fell 0.3 percent, the worst of any of the 10 company groups that make up the index. Apple Inc. lost 1.8 percent and Microsoft Corp. fell 1.2 percent.

The technology-focused Nasdaq composite index slid 14.75 points, or 0.5 percent, to 2,698.54. It lost 2.4 percent for the week.

Chip maker Advanced Micro Devices Inc. sank 6 percent. AMD’s fourth-quarter profit shrank compared with a year ago, when a big legal settlement it won from archrival chip maker Intel Corp. lifted its earnings.

Google reported a 29 percent rise in income after the market closed Thursday. The Internet search giant said that co-founder Larry Page will take over as chief executive, replacing Eric Schmidt. Google’s stock fell 2.4 percent.

Bond prices rose slightly, sending their yields down to 3.41 percent from 3.43 percent late Thursday.

Rising and falling shares were about even on the New York Stock Exchange. Consolidated volume came to 4.7 billion shares.

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Economic growth continued to expand moderately over the past few weeks, the Federal Reserve said Wednesday.

In its latest snapshot of regional economic conditions, the Fed reported that manufacturing, retail and non-financial services sectors were strong in most regions.

But some sectors did not fare as well. The Fed said residential real estate market remained weak nationwide, as did commercial real estate construction.

The Fed did offer measured optimism on employment, another sector that has not matched the improvement of the economy at large. The Fed reported that the labor market "appeared to be firming somewhat" in most areas, but noted that wages remained stagnant.

Known as the Beige Book, the report summarizes economic conditions in the central bank’s 12 districts across the nation, and is released eight times a year. The report will help set the tone for the Fed policy meeting set to take place Jan. 25-26.

Across the board, retailers told the Fed that sales appeared higher in this holiday season than last year, and in some cases, exceeded expectations. That suggests consumers are opening their wallets, a trend reinforced by an increase in tourism in most parts of the nation.

Inflation remained in check, the Fed said. While some producer costs moved higher, the price increases were not passed on to consumers due to competitive pressures.

The Cleveland, Atlanta, Chicago, St. Louis, Kansas City and Dallas districts all said "activity increased modestly to moderately," the report said. Meanwhile, the economy of the Minneapolis district "continued its moderate recovery," while San Francisco "firmed further." 

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Evacuated victims began returning to homes caked in sludge on Friday as Australia’s flood crisis eased, though one sandbagged town watched nervously as a swollen river level crept higher and forecasters warned of more rain.

Officials said they were moving from the emergency phase into cleanup as flood water levels stabilized in the hard-hit coastal city of Rockhampton and dropped further in towns further inland.

Queensland state has been in the grip of Australia’s worst flooding in some 50 years since drenching tropical rains fell for days starting just before Christmas. At its worst, an area the size of France and Germany combined was covered with water, some 40 townships were inundated and nearly 4,000 people evacuated.

Police say 10 people have died in swollen rivers or floodwaters in Queensland since late November.

The flooding shut some 40 coal mines in the state, pushing up global prices, and has hurt wheat, mango, sugarcane and other crops. Road and rail links have been washed away in many places, and officials warn it could be months before they are restored so industry and other activity can return to normal.

Some of the 150 people of Condamine went home in a convoy on Thursday for the first time since everyone in the small cattle-ranch supply town 190 miles (300 kilometers) west of Brisbane, the state capital, was evacuated on Dec. 30 to escape rising floodwaters.

They found the waters gone, but that 42 of the town’s 60 houses had been inundated by the flood.

“It’s just flattened everything,” said pub owner Shane Hickey. “All the grass is mud, all the plants have been torn out of the ground, the trees have gone over and are just covered in silt and mud.”

The town still has no drinking water and officials warned of waterborne disease. Local Mayor Ray Brown said electricians, plumbers, portable toilets and water and food were being brought in for residents returning Friday.

As the cleanup began in some towns, others were bracing for the worst of the floods yet to arrive.

In St. George, where levies of earth and sandbags have been built around dozens of homes, officials said the floods’ peak was now expected to be lower than originally thought, meaning fewer than 30 homes in the town of some 2,500 people were at risk instant payday loans.

In Dalby, east of Condamine, officials said floodwaters were rising faster than expected and were expected to peak Friday rather than the weekend. The town’s swollen creek is expected to inundate yards and a caravan park, but not to enter houses, Brown said.

Authorities renewed warnings for people to stay out of floodwaters, saying they were still dangerous even as they eased.

“I think people often underestimate the awesome power of floodwaters,” Queensland Premier Anna Bligh said. “It is a very dangerous body of water. You are only being asked to move for your safety and the safety of your family and emergency workers.”

Nearly 4,000 people across Queensland have been evacuated from their homes since driving rains that began just before Christmas left much of the region under a sea of murky water. Around 1,200 homes have been inundated, with another 10,700 suffering some damage in the flood zone.

The total cost of the floods is not yet known. Bligh has said the price of rebuilding homes, businesses and infrastructure coupled with economic losses could be as high as $5 billion.

The mayor of Rockhampton, a city of 75,000 that was the largest hit, said it would take 12 months before the town recovered.

The city’s overflowing Fitzroy River is very slowly receding, after spilling onto 3,000 properties and leaving 200 homes with water above the floorboards. More than 500 people were evacuated from the city.

The Bureau of Meteorology issued a severe thunderstorm warning for a region just south of Rockhampton, saying heavy rain, hail and flash flooding could be expected for several hours on Friday. Heavy storms were also forecast for other parts of the state.

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A small St. Louis company is taking gooey butter cake worldwide.

Siblings Marilyn Ann Scull and Dale Allen Schotte began commercial production of their mother’s recipe for the signature St. Louis dessert in 2006, a few weeks after they opened Park Avenue Coffee in Lafayette Square. In their first full year of production, they turned out about 700 cakes in a tiny space at the rear of the store at 1919 Park Avenue.

Now they have a new company name, Ann & Allen Baking Co.; a new production facility with 2,000 square feet in Dogtown; and a new line of cake mixes.

By mid-December, Ann & Allen had baked more than 22,000 cakes this year for Park Avenue Coffee, other local retail outlets, catering and online sales. They now make more than 70 flavors and have shipped cakes this year to 79 countries, including Afghanistan and New Zealand.

What’s more, they’ve sold more than 10,000 boxes of their gooey butter cake mix in its first year of production. Schotte says the mix is currently sold at 56 stores in 15 states. Straub’s and Eckert’s are their two largest customers in the metro area.

And at 9 p.m. Thursday, Park Avenue Coffee will reach a national cable TV audience when the Food Network pits it against another St. Louis specialist, Gooey Louie, on “Food Feuds.”

As with most success stories, Scull’s and Schotte’s has some twists. Schotte spent 20 years in the computer industry, primarily working for an Ohio-based company that specializes in automobile dealerships. He was moonlighting as a consultant when he was hired by the owners of what was then called Perc on the Park. In addition to utilizing his skill with computers, they turned to him for advice on everything from retail operations to décor.

“I told them, ‘If you ever want to sell, let me know,’” Schotte says.

When they did just that two years later, Schotte told them he wasn’t interested anymore. But that soon changed, after he got a call from Scull.

“My sister calls me all hysterical,” Schotte says. She had quit her job with Domino’s pizza, where she had worked for 20 years. “She said, ‘That’s it, I’m done.’”

When Schotte raised the possibility of buying Perc in the Park, Scull resisted, saying she didn’t even drink coffee.

“I said, ‘Just put away the pepperoni and substitute little beans,’” Schotte says.

They bought the shop, renaming it Park Avenue Coffee, then added a quintessential local treat, gooey butter cake, to the menu. Scull called their mother, Evelyn Thomeczek Schotte, for the recipe.

Evelyn Schotte was one of 13 children who grew up on her family’s farms in Leslie

Men probably have been renting tuxedos since Black Tie events were first conceived but women only recently started catching on.

Similar to saving bucks on that pricey tux, renting party dresses and formal gowns can save partygoers hundreds of dollars on clothing that has very limited wearability.

One relatively new service, RentTheRunway.com, offers members thousands of dresses for a four- or eight-day stint. Geared toward special occasions or limited use wear for those on a budget, the rental prices are about 80% off retail.

For example, a Proenza Schouler accordion dress costs $1,665 to buy but rents for just $200. New styles are added regularly and retired looks are then sold for up to 65% off. (The company sells its older and overstocked items on a clearance section of its site.)

"The first dress I rented was last May for my friend’s wedding. I think it was Nicole Miller, I loved it," said Susan Rose of New York City. "If I was going to buy something it would cost over $500, which is more than I should be spending." Instead, Rose says she has rented five different dresses over the course of the year, most for just $50.

Dresses are organized on the site by style, designer, or occasions like "winter wedding," "girls-night-out" or "this-is-getting-serious-date dresses."

Users pick the dress of their choice and then schedule a delivery date. Garments are delivered same day in New York City, and overnighted everywhere else in the U.S. To cut down on outfit anxiety, the company sends the dress in two sizes and takes care of the dry cleaning afterward. Renting a dress requires signing up for a free membership, and then paying for the rental, $5 insurance, shipping and any applicable taxes best payday advance.

The site, which has 600,000 members, launched near the peak of the recession, but according to co-founder Jenny Fleiss, that timing helped it get off the ground. "People were really thinking about cost per wear," she said.

Now Rent The Runway is enjoying its busiest season to date. "Everyone has holiday parties and New Year’s Eve coming up — when are you going to wear a gold sparkly one-shoulder dress again?" Fleiss asked.

Fleiss says the biggest hurdle is getting fashionistas over the idea of renting a dress to begin with, but after that most customers, like Rose, become frequent users.

Still, national services like this are few and far between, even on the heels of a recession that put a serious stranglehold on luxury indulgences.

Better-known Bag Borrow or Steal provides a similar service for the rental of designer handbags and accessories. Since launching in 2004, the site now has over 2 million members in the U.S. who sample luxury bags, jewelry, sunglasses and watches from high-end designers like Chanel, Louis Vuitton, Gucci and Prada.

Although the company has no immediate plans to include clothing in their offerings, Bag Borrow or Steal’s President and CEO Russ Blain says it is not out of the question. "It is something that would be interesting to us," he said.

According to Blain, the rental market is poised for growth as the economy improves. "We’re starting to see an uptick in the rental business now," he said. "Our future is pretty bright." 

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The People’s Republic of China’s long-term foreign and local currency ratings have been raised to AA- from A+. The outlook is stable.

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