16/9/2012: Who pays for the Banks Guarantee? Irish Mortgage Holders

Another interesting snippet from the IMF report on Ireland's performance:

"The already low net interest margin fell by 40 basis points in Q1, to 0.8 percent of average assets. Though funding costs fell by 35 percent from Q4 2011 reflecting the actions of a leading bank to lower deposit rates, this was not enough to compensate for weakening interest income due to higher loan impairments and the drag from low yielding tracker mortgages. The ELG fee remained high, at 110 basis points in Q1, absorbing some 40 percent of the net interest margin (up from 28 percent in Q4 2011)."

What does this mean?
1) Banks are suffering from lower margins due to declines in ECB rate having an adverse impact on their tracker mortgages book. They compensate by soaking savers (deposit rates down) and ARMs (adjustable rate mortgages are up).
2) Instead of allowing banks more funds to cover mortgages losses, the (1) above - soaking of savers and ARMs - goes primarily to fund Mr Noonan and the State (via ELG fees paid by the banks for the Guarantee cover to the Exchequer).

Great. As a holder of an adjustable rate mortgage, I get taxed by Mr Noonan once on household charge (soon to be replaced by a property tax) and  via ELG. Well done, 'low tax Government'. Of course, I am also being used to subsidize tracker mortgages, including buy-to-lets.

25/3/2012: QNA Q4 2011 - Part 3

In part 1 of the QNA analysis we covered annual results for annual GDP and GNP in constant prices terms. Part 2 analysis focused on GDP/GNP gap and losses in national income compared to pre-crisis trend. Here, we cover some quarterly trends for GDP and GNP based on constant prices data.

Let's consider changes by sector:

• Agriculture, forestry and fishing sector output fell 5.1% yoy in Q4 2011 following a 9.34% rise yoy in Q3 2011. In Q4 2011 the sector accounted for just 1.26% of the total quarterly GDP. Compared to Q4 2007 the sector output is now down 6.0%.
• Industry output rose 2.3% yoy in Q4 2011 after rising 6.25% in Q3 2011. The sector is now accounting for 28.34% of the quarterly domestic output. Sector output is now down 3.3% when compared against Q4 2007.
• Building & Construction sub-sector of Industry sector posted yoy decline of 6.7% inQ4 2011 that follows on 39.32% drop in Q3 2011. The sub-sector is now accounting for just 2.62% of total output and is down 55.0% on Q4 2007.
• Distribution transport and communications sector shrunk 0.6% yoy in Q4 2011 which follows 4.99% drop in Q3 2011. The sector accounts for 13.23% of total output and is down 17.3% on Q4 2007.
• Public administration and defence sector shrunk 3.8% yoy in Q4 2011 which follows on a 6.53% contraction in Q3 2011. The sector now accounts for 3.58% of the domestic output and is down 6.5% on Q4 2007.
• Other services including rents output contracted 3.1% yoy in Q4 2011 following on a 5.14% contraction in Q3 2011. The sector accounts for 42.37% of the economy and is down 12.5% on Q4 2007.
• As the result of this, GDPat constant factor cost expanded in Q4 2011 by 1.1% yoy and this follows on a rise of 0.88% in Q3 2011. This metric of domestic output is now dow 10.6% on Q4 2007.
• Taxes net of subsidies are down 2.3% yoy in Q4 2011 and this follows a 2.76% drop in Q3 2011. This accounts for 9.70% of GDP and the category is now down 30.0% compared to Q4 2007.
• Headline GDP at constant market prices rose 0.7% yoy after expanding 0.52% in Q3 2011. The GDP at constant prices in Q4 2011 was 12.8 below that in Q4 2007.
• Net factor income from the rest of the world (aka largely transfer pricing net of receipts by Irish corporates and individuals on their foreign investments) grew 59.9% yoy in Q4 2011 which follows on 7.41% growth in Q3 2007. These transfers now account for 18.51% of our GDP and were running 10.0% ahead of the levels recorded in Q4 2007.
• Headline GNP in constant prices in Q4 2011 fell 7.1% yoy following a 1.18% contraction in Q3 2011. National income in constant prices is now 16.6% below that attained in Q4 2007.
• GDP/GNP gap stood at 18.51% in Q4 2011 slightly down on 20.18% in Q3 2011.

Charts:

More sectoral analysis to follow in the next post.