BOSI Staff, "We want 49.9% shareholding and we want a cut of the profits!"

MrDarcy · 20-08-2010 10:48AM #1

http://www.irishtimes.com/newspaper/frontpage/2010/0820/1224277230387.html?via=mr

I've just read the above article and I'm laughing after reading it! Brian Gallagher, a regional organiser with the trade union Unite, is now demanding that Bank of Scotland Ireland provide for the staff to be allowed take a 49.9% shareholding in the new management company that will manage the banks loans from herein, and the purpose of this shareholding would appear to be:

"There is no doubt that the bank will pay a bonus for a quick resolution of these loans. That means that my members’ jobs will end sooner. If there are ‘super profits’ to be made out of this then my members want to have a share of that.”

What planet is this union on??? While I understand the need to protect members interests, this hardly extends to basically putting a gun to the head of the bank in terms of the cooperation of union members with the change going forward and demanding a 50% stake in the new business that will be left to manage the loans and then on that basis demanding a share of "super profits". How can there be "super profits", when more than 50% of the banks loan book is pure toxic debt, i.e. JUNK?!?!?!?!?

If these people who are UNITE members wanted to set up a management company or a bank for that matter, why didn't they do it before now???

I'm all for cooperation and consultation but I really don't like this recent thing where unions start demanding a controlling stake in a business, if you want to run a business then start one up from scratch, take the risks, accept the fact that things like personal relationships and starting a family will get pushed down the line, accept that you will probably be living in poverty when you are starting up, your social life is out the window, emotionally it's a very lonely place, you will take one knock after the other and with a bit of luck and hard work and 18 hour days, you might just get somewhere.

But this recent thing of people electing to be employee's, then when there is a problem they all of a sudden want to be employers, while having carried NONE of the inherent risk and hardship associated with the start up itself, I think it's selfish and greedy.

Gurgle · 20-08-2010 10:55AM

MrDarcy wrote: »

more than 50% of the banks loan book is pure toxic debt, i.e. JUNK?!?!?!?!?

I take it you have had a good dig through their loan books, so your qualified to make this statement?

BoSI were afaik mostly into residential lending, owner occupier more so than buy-to-let. The vast majority of these mortgages are performing just fine.

The current value of the property a loan is secured on doesn't matter once the repayments are being made.

MrDarcy · 20-08-2010 11:12AM

Gurgle wrote: »

I take it you have had a good dig through their loan books, so your qualified to make this statement?

BoSI were afaik mostly into residential lending, owner occupier more so than buy-to-let. The vast majority of these mortgages are performing just fine.

The current value of the property a loan is secured on doesn't matter once the repayments are being made.

http://www.irishtimes.com/newspaper/finance/2010/0820/1224277228349.html?via=rel

I don't need to be an accountant to be able to read that according to BOSI themselves, 44% of their Irish loan book is impaired. I can't speak for how their residential loan book is performing but I can tell you that 44% of their overall loan book is not performing, so how the residential side of the loan book is doing, really isn't that important if the overall loan book is being dragged down by their exposure to development loans (junk), and non recoverable business loans (junk).

Count Dooku · 20-08-2010 11:18AM

Gurgle wrote: »

I take it you have had a good dig through their loan books, so your qualified to make this statement?

BoSI were afaik mostly into residential lending, owner occupier more so than buy-to-let. The vast majority of these mortgages are performing just fine.

Most of BoSI loans were trackers...

spank_inferno · 20-08-2010 11:52AM

There is no harm in the union asking.

This new company (which wont even be a bank) may end up making money for the executives who made a bit of a mess of things in the first place.

Its unlikely that they will make any money but just in case there is no harm in asking for this seeing as its just a winding down company in the first place.

.... you wont know if you dont ask!

Cookie_Monster · 20-08-2010 11:55AM

Would you be as upset if it was a management buyout that ended up owning the company? I don't really see the issue here. BOSI lied, saying they were committed to the Irish market and are now pulling out. I'd sure as hell want something off them for that if I worked there.

Gurgle · 20-08-2010 12:25PM

MrDarcy wrote: »

I don't need to be an accountant to be able to read that according to BOSI themselves, 44% of their Irish loan book is impaired.

Sorry, my mistake.
I read that as Lloyds having 44% 'impaired' overall, as opposed to BoSI aka Halifax formerly ICC Bank who were primarly a residential mortgage lender.

(How the hell is anyone meant to keep track of these companies)

Count Dooku wrote:

Most of BoSI loans were trackers...

The banks would like you to believe that they are losing money on existing tracker mortgages. This is quite simply not true, they have a guaranteed margin on these loans.

They may not be able to profitably give a new loan tracking ECB + 0.7%, but that doesn't mean they're losing on the existing ones.

Count Dooku · 20-08-2010 12:47PM

Gurgle wrote: »

The banks would like you to believe that they are losing money on existing tracker mortgages. This is quite simply not true, they have a guaranteed margin on these loans.

Banks would have guaranteed margin only if their credit rating would be untouched, but now irish banks have to borrow at least on libor + 1.5%

stepbar · 20-08-2010 01:00PM

MrDarcy wrote: »

http://www.irishtimes.com/newspaper/frontpage/2010/0820/1224277230387.html?via=mr

I've just read the above article and I'm laughing after reading it! Brian Gallagher, a regional organiser with the trade union Unite, is now demanding that Bank of Scotland Ireland provide for the staff to be allowed take a 49.9% shareholding in the new management company that will manage the banks loans from herein, and the purpose of this shareholding would appear to be:

"There is no doubt that the bank will pay a bonus for a quick resolution of these loans. That means that my members’ jobs will end sooner. If there are ‘super profits’ to be made out of this then my members want to have a share of that.”

What planet is this union on??? While I understand the need to protect members interests, this hardly extends to basically putting a gun to the head of the bank in terms of the cooperation of union members with the change going forward and demanding a 50% stake in the new business that will be left to manage the loans and then on that basis demanding a share of "super profits". How can there be "super profits", when more than 50% of the banks loan book is pure toxic debt, i.e. JUNK?!?!?!?!?

If these people who are UNITE members wanted to set up a management company or a bank for that matter, why didn't they do it before now???

I'm all for cooperation and consultation but I really don't like this recent thing where unions start demanding a controlling stake in a business, if you want to run a business then start one up from scratch, take the risks, accept the fact that things like personal relationships and starting a family will get pushed down the line, accept that you will probably be living in poverty when you are starting up, your social life is out the window, emotionally it's a very lonely place, you will take one knock after the other and with a bit of luck and hard work and 18 hour days, you might just get somewhere.

But this recent thing of people electing to be employee's, then when there is a problem they all of a sudden want to be employers, while having carried NONE of the inherent risk and hardship associated with the start up itself, I think it's selfish and greedy.

The proposed company that the existing BOSI execs are going to set up is about as risk free as it comes. The company will simply manage the debt for BOS UK (in terms of the customer relationships and admin) in return for a fee.

It seems to me that BOS just want shot of Ireland. One has to wonder what sort of terms and conditions will staff transfer across to, I guess they won't be better for sure.

So I say fair fcuks to the Union because in fairness BOS has taken the p1ss out of their staff.

Gurgle · 20-08-2010 01:24PM

Count Dooku wrote: »

Banks would have guaranteed margin only if their credit rating would be untouched, but now irish banks have to borrow at least on libor + 1.5%

Existing loans = money already borrowed

stepbar · 20-08-2010 01:34PM

Gurgle wrote: »

Existing loans = money already borrowed

Not entirely correct.

Depends on how the loan was funded. If the loan was funded by simply lending out existing deposits that's fine. However if the money was borrowed on interenational markets then usually banks will borrow a tranche of cash at a 5 yr Cost of Funds (COF) rate. Problem is that the loan maybe for 10 years or so. In normal circumstances the bank would just borrow the funds for another 5 years. However, most banks in Ireland are now having to pay a premium above COF rates.

MrDarcy · 20-08-2010 02:00PM

stepbar wrote: »

The proposed company that the existing BOSI execs are going to set up is about as risk free as it comes. The company will simply manage the debt for BOS UK (in terms of the customer relationships and admin) in return for a fee.

It seems to me that BOS just want shot of Ireland. One has to wonder what sort of terms and conditions will staff transfer across to, I guess they won't be better for sure.

So I say fair fcuks to the Union because in fairness BOS has taken the p1ss out of their staff.

Well the other obvious argument is why would they remain here when there is no opportunity in the short, medium or long term??? Their business model has turned out to be a loss making model that could only make money in a boom. How have BOS takin the p*ss out of their staff??? They get well paid, they get their entitlements, too bad if the underlying business model isn't sucessful, that's capitalism!

titular · 20-08-2010 02:02PM

stepbar wrote: »

Not entirely correct.

Depends on how the loan was funded. If the loan was funded by simply lending out existing deposits that's fine. However if the money was borrowed on interenational markets then usually banks will borrow a tranche of cash at a 5 yr Cost of Funds (COF) rate. Problem is that the loan maybe for 10 years or so. In normal circumstances the bank would just borrow the funds for another 5 years. However, most banks in Ireland are now having to pay a premium above COF rates.

This is correct, however, it was highly unusual for banks to borrow on a 5 year basis - most of the funding sourced was done so on a 6 or 12 month basis. The drastic rise in the cost of funding for the Irish banks has now led to a situation whereby they are indeed losing heavily on tracker mortgages.

Just as the Irish government are now turning to the relatively small portion of middle income earners to bail out the country, the banks are now turning to their variable rate customers to bail out their losses on the loan books.

Count Dooku · 20-08-2010 02:06PM

titular wrote: »

Just as the Irish government are now turning to the relatively small portion of middle income earners to bail out the country, the banks are now turning to their variable rate customers to bail out their losses on the loan books.

and greedy unions couldn't miss opportunity to participate in this robbery

titular · 20-08-2010 02:16PM

Count Dooku wrote: »

and greedy unions couldn't miss opportunity to participate in this robbery

But of course - "Down with the evils of capitalism, down with greedy corporations, down with profits. Unless we can ensure we get a slice of the profits in which case up with capitalism, up with greedy corporations ..."

Ah, unions, truly the curse of the working classes.

Scarab80 · 20-08-2010 02:45PM

Gurgle wrote: »

Existing loans = money already borrowed

If only it worked like that! We wouldn't have a banking crisis.

stepbar · 20-08-2010 04:11PM

MrDarcy wrote: »

Well the other obvious argument is why would they remain here when there is no opportunity in the short, medium or long term??? Their business model has turned out to be a loss making model that could only make money in a boom. How have BOS takin the p*ss out of their staff??? They get well paid, they get their entitlements, too bad if the underlying business model isn't sucessful, that's capitalism!

BOSI gave no indication to customers or staff that a full scale closure was on the cards. In fact I'd be confident that the first anyone heard was last weekend.

What ever about capitalism, BOS have a social responcibility to customers and staff. 150 hotels face an uncertain future. I can safely say that the majority of those hotels will have zero chance of securing other finance elsewhere (BTW I acknowledge that there are far too many hotels in Ireland however not all of them are unsustainable).

800 odd staff are not likely to have a job in the next 5 - 10 years. Furthermore, it's highly unlikly that any management company will retain 800 staff in what is effectively a wind down scenario.

The honourable thing to do would have been to stick it out, work with customers and take responcibility (by all means wind down after 10 years but maintain working capital facilities over the wind down period); instead BOS will hand over the dirty work to a management company and alas their execs will go back to sipping champagne in the ivory towers over London City.

stepbar · 20-08-2010 04:26PM

titular wrote: »

But of course - "Down with the evils of capitalism, down with greedy corporations, down with profits. Unless we can ensure we get a slice of the profits in which case up with capitalism, up with greedy corporations ..."

Ah, unions, truly the curse of the working classes.

Ah but that would be fine if there was a real "entrapreneural" risk here. What we have is a management company being brought in to tidy up the mess allowing BOS to side step their responcibilities (social and otherwise) to customers and staff. Lets face it, there will be SFA risk involved and as such I'd be with the staff on this one. It's highly unlikely there will be any major startup costs for this business.

If you were after loosing your job and in the Unite negotiating this deal, why would you give a fcuk about BOS? It's not often I agree with what unions do I'd be sure hoping they play hard ball on this occasion.

BlaasForRafa · 20-08-2010 04:47PM

spank_inferno wrote: »

There is no harm in the union asking

And BOSI should tell the union to go **** itself.

SkepticOne · 20-08-2010 04:58PM

Someone earlier was saying that BOSI mainly lent into the residential sector. You could this move by Bank of Scotland to pull out as indicative of severe deterioration in residential mortgage books in Ireland. House prices have fallen significantly and are likely to continue to so. Job prospects are still bleak with thousands of businesses shutting every month. BOSI would be hit hard by this because of their large proportion of tracker mortgages.

It is a great shame so many will lose their jobs over this however the only upside is that the parent company will take the financial hit. If the unions took it over in Ireland and things continued to deteriorate, the bank (now an Irish bank) could easily become part of a future NAMA II bailout given the government's policy of not allowing financial institutions to fail regardless of the cost to the tax payer.

Scarab80 · 20-08-2010 05:24PM

SkepticOne wrote: »

Someone earlier was saying that BOSI mainly lent into the residential sector. You could this move by Bank of Scotland to pull out as indicative of severe deterioration in residential mortgage books in Ireland. House prices have fallen significantly and are likely to continue to so. Job prospects are still bleak with thousands of businesses shutting every month. BOSI would be hit hard by this because of their large proportion of tracker mortgages.

It is a great shame so many will lose their jobs over this however the only upside is that the parent company will take the financial hit. If the unions took it over in Ireland and things continued to deteriorate, the bank (now an Irish bank) could easily become part of a future NAMA II bailout given the government's policy of not allowing financial institutions to fail regardless of the cost to the tax payer.

BOSI was not involved in the residential mortgage sector, they were a business bank.

The new company that the irish employees transfer to will not be a bank, the loans will transfer to Bank of Scotland plc. The employees will be retained in a service company who will (i assume) be paid a fee by BOS for the administration of the remaining loans. There is no chance of the government being involved these loans.

SkepticOne · 20-08-2010 06:20PM

Scarab80 wrote: »

BOSI was not involved in the residential mortgage sector, they were a business bank.

From the Irish Times article:

The bank was responsible for a further, and arguably more fundamental, market shake-up in 2000 and 2001 when it introduced the concepts of tracker mortgages and interest-only loans to a very hungry band of Irish homebuyers and owners. Innovative in the extreme compared to the plain-vanilla fixed and variable offerings that dominated until then, trackers promised to stay within a fixed margin of the European Central Bank’s key interest rate for the life of the loan.

Also from this article:

It is estimated that up to 20 per cent of the bank’s 175,000 customers are business customers. While there is no specific breakdown of Bank of Scotland’s market share in terms of business accounts, research by Isme estimates that the bank has a 5 per cent share of SME customers.

From this we learn that only a minority of customers were businesses. They were highly active in the residential mortgage market. Maybe you are thinking of another entity.

Scarab80 wrote: »

The new company that the irish employees transfer to will not be a bank, the loans will transfer to Bank of Scotland plc. The employees will be retained in a service company who will (i assume) be paid a fee by BOS for the administration of the remaining loans. There is no chance of the government being involved these loans.

That is true, however, if the unions were to get involved and receive a large stake and a say in how things are done, then things would change. There would be pressure to resurrect it as a going concern independent of its parent. It may seem strange until you look at what has gone on with NAMA to date as well and the money that is being pumped into the failed bank Anglo. As it stand, however, I agree with you that there's no chance of government involvement.

chris85 · 20-08-2010 06:29PM

The staff will probably get a shareholding in the new company. BOSI probably aint too bothered about sharholding as they are shot of the irish market but will seek a controlling share obviously and the unions know this and thus have asked for the most they can get logically.

They are just playing hardball as negotiations will go on. They will probably end up with a 15-20% sharholding of the new company.

liammur · 20-08-2010 06:35PM

Can't see how the new company will have much value.

it's just another illustration of what a mess we created with this property bubble.

dan_d · 20-08-2010 06:37PM

Scarab80 wrote: »

BOSI was not involved in the residential mortgage sector, they were a business bank.

The new company that the irish employees transfer to will not be a bank, the loans will transfer to Bank of Scotland plc. The employees will be retained in a service company who will (i assume) be paid a fee by BOS for the administration of the remaining loans. There is no chance of the government being involved these loans.

Well they were to an extent - my mortgage is with them.

Funny.I remember telling the broker at the time that I'd rather go with an Irish bank, just in case anything happened, BOSI being an external bank.

She looked at me like I had 6 heads, and said nothing will ever happen, it's in Ireland for the long run, and it's going nowhere, they're an excellent bank and couldn't possibly go bust.

In future, I'm listening to my instincts (though I'm not sure what they would have got me in this case)

Scarab80 · 20-08-2010 06:54PM

SkepticOne wrote: »

From the Irish Times article:

Also from this article: From this we learn that only a minority of customers were businesses. They were highly active in the residential mortgage market. Maybe you are thinking of another entity.

Yeah I was seperating BOSI and Halifax.

SkepticOne wrote: »

That is true, however, if the unions were to get involved and receive a large stake and a say in how things are done, then things would change. There would be pressure to resurrect it as a going concern independent of its parent. It may seem strange until you look at what has gone on with NAMA to date as well and the money that is being pumped into the failed bank Anglo. As it stand, however, I agree with you that there's no chance of government involvement.

The unions are seeking to gain a stake in the administration company, this has nothing to do with the main banking business of BOS. If they wanted to resurrect the company as a bank the unions would have to come up with several billion to buy the loan book from BOS.

In relation to the employees taking a 49% stake in the administration company I wouldn't see this being a problem for BOS. Take whatever they are estimating to pay to administer the loan book, knock a bit off and set fixed amounts to be paid to the admin company. The bank know what their liability will be and may be able to save a small amount, the employees can work more efficiently to maximise their return. The only problem from the banks point of view is they are exposed to losses the company may make, so to incentivise that not to happen there should be a clause where if the company goes into insolvency the company will be liquidated and the loans managed from the UK.

Trampas · 20-08-2010 07:03PM

what are BOSI going to do with their interest rates since people who have mortgages with them and in negative equity are kind of screwed. They could pump up the rates to whatever they want since they know the people can't move. well hard to move

BornToKill · 20-08-2010 07:13PM

Gurgle wrote: »

Sorry, my mistake.
I read that as Lloyds having 44% 'impaired' overall, as opposed to BoSI aka Halifax formerly ICC Bank ...How the hell is anyone meant to keep track of these companies

Ah, Mr Neary! Welcome to the forum!

Scarab80 · 20-08-2010 07:17PM

Trampas wrote: »

what are BOSI going to do with their interest rates since people who have mortgages with them and in negative equity are kind of screwed. They could pump up the rates to whatever they want since they know the people can't move. well hard to move

Interesting point, they certainly have little incentive to maintain competitive rates and every incentive to try and recover some of their losses and get people to leave so they can exit the country quicker.

I guess the only thing going in favour of BOSI customers is that if they do raise rates ridiculously high, good customers not in NE will switch mortgage provider and loan impairments will increase in relation to their poorer customers with no chance of recovering the loan amount if they are in NE.

amacachi · 20-08-2010 07:17PM

Gurgle wrote: »

(How the hell is anyone meant to keep track of these companies)

They wouldn't exist if people could keep track of it.

SkepticOne · 20-08-2010 07:27PM

Scarab80 wrote: »

The unions are seeking to gain a stake in the administration company, this has nothing to do with the main banking business of BOS. If they wanted to resurrect the company as a bank the unions would have to come up with several billion to buy the loan book from BOS.

In relation to the employees taking a 49% stake in the administration company I wouldn't see this being a problem for BOS. Take whatever they are estimating to pay to administer the loan book, knock a bit off and set fixed amounts to be paid to the admin company. The bank know what their liability will be and may be able to save a small amount, the employees can work more efficiently to maximise their return. The only problem from the banks point of view is they are exposed to losses the company may make, so to incentivise that not to happen there should be a clause where if the company goes into insolvency the company will be liquidated and the loans managed from the UK.

What you say makes sense from a business perspective, but once the unions get involved, the political perspective becomes dominant. When this management company gets set up, the bulk of the staff of the bank will move over. There will be no compulsory redundancies for over two years and I would not expect huge numbers to take voluntary redundancy. The unions have time, therefore, to make the case that there's a viable business in it. The unions would not stump up money to buy the mortgage book and I don't think it would be bought in any case. What would happen is that this entity would seek finance to set up as a new bank with the governments backing. It could still possibly manage the mortgage book for BOS but would now be involved in new lending on its own account. BOS would be rid of a loss making subsidiary and the Irish government would have a vehicle for lending in the Irish residential market.

Note that I don't agree with the above. But I see it as a possible scenario given what we've seen with Anglo. Anglo, after all, utterly failed as a bank and business. Really it should have been shut down in an orderly fashion. No one could have predicted at the time that the government would see it as fundamentally viable once enough money was sunk into it. Although the circumstances are different here, the basic logic is the same. The main difference is that Anglo was not a subsidiary of a foreign bank and was involved in developer loans rather than residential.

BOSI Staff, "We want 49.9% shareholding and we want a cut of the profits!"

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