Latest news with #bailout
Irish Times
2 days ago
- Business
- Irish Times
Why the State ‘breaking even' on AIB and the banks isn't the whole story
The Government has sold its remaining stake in AIB, marking the end of a long, unloved chapter in banking history. The Department of Finance says the State has made a surplus of €600 million on its €29.4 billion bailout of AIB , Bank of Ireland and PTSB . Some media reports refer to the State basically breaking even, but such phrasing conceals more than it reveals. Firstly, the headline figure is in nominal terms. Adjusted for inflation, the real value of that €29.4 billion – doled out between 2009 and 2011 – is far higher. A euro in January 2011 is worth €1.29 today, which puts the cost of the bailout at roughly €38 billion in today's money. Then there's interest. The State borrowed to fund the bailout. For AIB alone, the Comptroller & Auditor General put debt servicing costs at €7.1 billion by the end of 2021. READ MORE That's before you factor in opportunity cost: what else that money could have done, were it deployed differently. An investor who bought a dud stock in 2009 and finally got out at break-even might feel relief. However, a $1,000 investment in the S&P 500 in 2009 would be worth over $9,000 by 2025. Time has a cost; so does tying up capital in low-return assets. Inflation, interest costs, opportunity costs – the framing around the break-even point is problematic. It is more of a psychological concept than a financial one. To be fair, the objective was never to turn a profit. The bailout was about stabilising the banking system and preventing economic collapse, but that makes the implicit 'we made money' narrative all the more grating. It reframes an emergency rescue as a shrewd investment, which it wasn't. Breaking even offers closure, but it's no triumph.
Sky News
3 days ago
- Business
- Sky News
University of Dundee bosses quit after 'scathing' report into financial crisis
The interim principal of the University of Dundee and two senior members of its governing body have stepped down following a scathing report into the institution's financial deterioration that led to a £22m government bailout. The independent investigation into the university's finances was ordered after it announced there would be hundreds of job losses to address a £35m deficit. The Scottish Funding Council (SFC) - an arms-length public body of the Scottish government - provided a £22m support package. Key findings from the Gillies Report for the SFC include poor financial judgment, inadequate management and reporting, and lack of agility by leadership in responding to a fall in income. Interim principal and vice-chancellor Professor Shane O'Neill quit in the wake of the report. The university also said Tricia Bey, acting chair of the university court, and Carla Rossini, convenor of the finance and policy committee, who were both due to step down this summer, are now bringing this forward and leaving with immediate effect. Professor O'Neill said: "It is with a very heavy heart, having committed myself fully to the recovery process over these past months, that I have decided to step aside from my position and will be leaving the university. "It is important that the university can move on and I recognise that this will be easier with new leadership." Members of the university executive group (UEG), which included the "triumvirate" of Professor O'Neill, former principal Professor Iain Gillespie and ex-chief operating officer Jim McGeorge, were found to have "failed" last year to "properly respond to the worsening situation" and disclose the looming crisis to other university officials. The report found the root causes of the financial issues included the decline in overseas postgraduate students coming to the university and the growth agenda proposed by leaders. According to the report, the "credibility and accuracy" of reports given to senior leaders regarding the financial situation were "poor". The report said there was "insufficient corroborated evidence" to suggest members of the executive team had sought to suppress information about the scale of the crisis, while there was "circumstantial" evidence. Prof Gillespie, who left the university last year when news of the crisis became public, was described as someone who "did not welcome difficult conversations". An email sent by the former principal in March of last year, claiming the university was "moving into a surplus position", was branded "misleading" by the report, while his management style was criticised, particularly in how he dealt with women. The report stated: "Female members of staff in particular reported being spoken over, sidelined or discussed in public as being obstructive if they attempted to be heard, and there were reports that the university policy on dignity and fairness was not upheld in a number of instances." Dr Ian Mair, deputy chair of court, the university's governing body, said: "There is much in this report on which we have to reflect. We will take a short time to digest the full implications of the report but we will act on the findings." Education Secretary Jenny Gilruth said it was "evident" from the report's finding that "there are serious questions which must be answered by the University of Dundee's management team". Ms Gilruth added: "Whilst the university is an autonomous institution which is ultimately responsible for decision-making around its day-to-day operations, the Scottish government will do everything possible to secure a positive future for Dundee. "I will be updating parliament with a more detailed statement on the findings of the report and on future government support next week." MSP Miles Briggs, the Scottish Conservatives' shadow cabinet secretary for education, branded the report's findings "damning". He added: "The report is scathing about the inexcusable failures by those in leadership roles.
Arab News
4 days ago
- Business
- Arab News
Arif Habib Group submits bid as deadline nears for expressions of interest in PIA stake sale
ISLAMABAD: The chairman of the Arif Habib Group, a prominent Pakistani conglomerate with diversified interests across various sectors, said on Thursday the consortium had submitted its bid to acquire a stake in Pakistan International Airlines (PIA), the country's loss-making national flag carrier. Expressions of interest are due today, Thursday, for an up to 100 percent stake in PIA as the government moves forward with a long-delayed privatization plan aimed at easing pressure on its strained public finances. The sale of PIA will be the first major privatization for around two decades. Turning around loss-making state-owned enterprises is a condition of an ongoing $7 billion bailout by the International Monetary Fund. The government tried unsuccessfully to last year offload a stake in PIA, which is a major burden on its budget, but the sale was aborted because of the poor state of the airline and the conditions attached to any purchase. 'We have submitted our bid for acquiring the PIA stake,' Arib Habib, the chairman of Arif Habib Group, told Arab News. The group has a broad portfolio encompassing financial services, including brokerage and investment banking, fertilizers, cement, steel, real estate development, energy, and more. Some of its notable subsidiaries include Arif Habib Limited (AHL), Fatima Fertilizer Company Limited, Aisha Steel Mills Limited, Javedan Corporation Limited, and Sachal Wind Power. 'This time we are going into this process as a consortium that includes Arif Habib Corporation, Fatima Fertilizers Ltd., Lack City Holdings and City Schools Group.' In an advertisement issued by the government last month, it had said the deadline for the submission of expressions of interest and Statements of Qualification for the 'Divestment of Pakistan International Airlines Corporation Limited through privatization' had been extended to 4pm hours on Thursday, June 19, 2025. It did not provide a reason for the extension. No changes had been made to the remaining terms and conditions, the privatization commission had said. In April 2025, the commission invited expressions of interest from domestic and international investors to acquire a majority stake, ranging from 51 percent to 100 percent, in PIA, initially setting a submission deadline of Tuesday, June 3, 2025. According to the public notice, each EOI must be accompanied by a non-refundable processing fee of $5,000 or Rs1.4 million, with consortia required to pay the fee through any one member. Eligible bidders include legal entities such as companies, firms, and corporate bodies, either individually or as part of a consortium. Reuters reported on Wednesday that among those planning bids are Pakistani conglomerate the Yunus Brothers Group, owners of the Lucky Cement and energy companies, and a consortium led by Arif Habib Limited. Fauji Fertilizer Company, which is part-owned by the military, has also said it will be making an expression of interest. 'The board … has approved submission of an expression of interest and pre-qualification documents to the Privatization Commission … and undertaking a comprehensive due-diligence exercise,' FFC said in a notice to the Pakistan Stock Exchange this week. FFC is Pakistan's biggest fertilizer maker and has diversified interests in energy, food and finance. Any deal on PIA would expand the military group's footprint into aviation, though final terms will hinge on the government's privatization process and regulatory approvals. A group of PIA employees has also come forward to bid. 'The employees will use their provident fund and pension, in addition to finding an investor to place a bid. We're doing this to save jobs and turn around the company,' Hidayatullah Khan, president of the airline's Senior Staff Association, told Reuters this week. This is Pakistan's second attempt to sell PIA. A 2024 auction drew only one offer – Rs10 billion ($36 million) for 60 percent of the airline from real-estate developer Blue World City – far below the government's Rs85 billion ($305 million) floor price, and was rejected. Pakistan had offloaded nearly 80 percent of the airline's legacy debt and shifted it to government books ahead of the privatization attempt. The rest of the debt was also cleaned out of the airline's accounts after the failed sale attempt to make it more attractive to potential buyers, according to the country's privatization ministry. In April, PIA posted an operating profit of Rs9.3 billion ($33.1 million) for 2024, its first in 21 years. The airline has for years survived on government bailouts as its operational earnings were eaten up by debt servicing costs. Officials say offloading the debt burden and recent reforms like shedding staff, exiting unprofitable routes and other cost-cutting measures led to the profitable year. Ahead of the attempt to sell the airline last year, PIA had faced threats of being shut down, with planes impounded at international airports over its failure to pay bills and flights canceled due to a shortage of funds to pay for fuel or spare parts. With inputs from Reuters
Arab News
4 days ago
- Business
- Arab News
Expressions of interest due today for up to 100% stake in Pakistan International Airlines
ISLAMABAD: Expressions of interest are due today, Thursday, for an up to 100 percent stake in Pakistan International Airlines (PIA), the country's loss-making national flag carrier, as the government moves forward with long-delayed privatization plan aimed at easing pressure on its strained public finances. The sale of PIA will be the first major privatization for around two decades. Turning around loss-making state-owned enterprises is a condition of an ongoing $7 billion bailout by the International Monetary Fund. The government tried unsuccessfully to last year offload a stake in PIA, which is a major burden on its budget, but the sale was aborted because of the poor state of the airline and the conditions attached to any purchase. In an advertisement issued by the government last month, it had said the deadline for the submission of expressions of interest and Statements of Qualification for the 'Divestment of Pakistan International Airlines Corporation Limited through privatization' had been extended to 4pm hours on Thursday, June 19, 2025. No changes had been made to the remaining terms and conditions, the privatization commission had said. In April 2025, the commission invited expressions of interest from domestic and international investors to acquire a majority stake, ranging from 51 percent to 100 percent, in PIA, initially setting a submission deadline of Tuesday, June 3, 2025. According to the public notice, each EOI must be accompanied by a non-refundable processing fee of $5,000 or Rs1.4 million, with consortia required to pay the fee through any one member. Eligible bidders include legal entities such as companies, firms, and corporate bodies, either individually or as part of a consortium. Reuters reported on Wednesday that among those planning bids are Pakistani conglomerate the Yunus Brothers Group, owners of the Lucky Cement and energy companies, and a consortium led by Arif Habib Limited that includes Fatima Fertilizer, Lake City, and The City School. Fauji Fertilizer Company, which is part-owned by the military, has also said it will be making an expression of interest. 'The board … has approved submission of an expression of interest and pre-qualification documents to the Privatization Commission … and undertaking a comprehensive due-diligence exercise,' FFC said in a notice to the Pakistan Stock Exchange this week. FFC is Pakistan's biggest fertilizer maker and has diversified interests in energy, food and finance. Any deal on PIA would expand the military group's footprint into aviation, though final terms will hinge on the government's privatization process and regulatory approvals. A group of PIA employees has also come forward to bid. 'The employees will use their provident fund and pension, in addition to finding an investor to place a bid. We're doing this to save jobs and turn around the company,' Hidayatullah Khan, president of the airline's Senior Staff Association, told Reuters this week. This is Pakistan's second attempt to sell PIA. A 2024 auction drew only one offer – Rs10 billion ($36 million) for 60 percent of the airline from real-estate developer Blue World City – far below the government's Rs85 billion ($305 million) floor price, and was rejected. Pakistan had offloaded nearly 80 percent of the airline's legacy debt and shifted it to government books ahead of the privatization attempt. The rest of the debt was also cleaned out of the airline's accounts after the failed sale attempt to make it more attractive to potential buyers, according to the country's privatization ministry. In April, PIA posted an operating profit of Rs9.3 billion ($33.1 million) for 2024, its first in 21 years. The airline has for years survived on government bailouts as its operational earnings were eaten up by debt servicing costs. Officials say offloading the debt burden and recent reforms like shedding staff, exiting unprofitable routes and other cost-cutting measures led to the profitable year. Ahead of the attempt to sell the airline last year, PIA had faced threats of being shut down, with planes impounded at international airports over its failure to pay bills and flights canceled due to a shortage of funds to pay for fuel or spare parts. With inputs from Reuters
Irish Times
5 days ago
- Business
- Irish Times
The Irish Times view on the State selling out of AIB: competition in banking is now the issue
The State's long withdrawal from the banking sector after the post-crash bail-outs has reached another milestone, with the sale of its remaining shareholding in AIB. Warrants, which give the State the right to buy some shares, are now likely to be effectively bought out by the bank. AIB will finally return completely to private hands. The direct financial cost to the State of the AIB bail-out was €20.8 billion and – including the cash for the warrants – the total amount returned over the years to the exchequer is likely to fall around €700 million short of this. While the return of the bulk of the funds is welcome, the total costs of the banking collapse to the State were, of course, much greater than the cash cost of bailing out these institutions. The banks were not solely responsible for the financial crash, but they were an important part of it. The tighter regulation, restructurings and restrictions on executive pay that followed were entirely appropriate. So was the bank levy, which should remain. With the pay cap in Bank of Ireland now lifted after its return to private ownership – even if a limit on bonuses remains in place – it was inevitable that the same would happen at AIB. In this context, there seemed little point in maintaining the pay cap at Permanent TSB, where the State still holds a 67 per cent stake. READ MORE With the two main banks now in private hands, State policy needs to focus not only on regulation but also on encouraging competition. As well as the financial and economic costs, the crash also led to the departure of a number of banks from Ireland – most notably Ulster Bank – severely limiting competition in many parts of the market, to the disadvantage of consumers. New entrants have provided competition in some areas, but often on a limited scale. The soaring profitability of the banks reflects not only the strength of the economy, but also their large market share. Their large deposit books remain a competitive asset. The more recent entrants to the market are welcome, but more is needed.
