We Need a Strong Banking Sector

Pilate said to them: ‘What then shall I do with Jesus who is called Christ?’

They all said to him, ‘Let Him be crucified!’

Then the governor said, ‘Why, what evil has He done?’

But they cried out all the more, saying, ‘Let Him be crucified!’

When Pilate saw that he could not prevail at all, but rather that a tumult was rising, he took water and washed his hands before the multitude, saying, ‘I am innocent of the blood of this just Person. You see to it.’

And all the people answered and said, ‘His blood be on us and on our children.’

One of the more memorable verses from Matthew’s Gospel, and one which over time loses none of its power and potency.

I have always had difficulty with this level of betrayal.

It is unfortunately one of the more durable human characteristics, which is evidenced everywhere at varying levels, and in my world in the business of real estate and finance, it appears as recently as in an interview in last month's Belfast Telegraph.

Ross McEwan, head of Ulster Bank's parent, Royal Bank of Scotland, held an exclusive with the paper where he talked about the improvements that have been made to Ulster Bank in recent years, all to the benefit of the customer.  Profitability will follow, which is great, and what any business should be about in any case. So it was great to hear a positive interview, as we do need a strong banking sector if we are to make progress in Northern Ireland.

However, it was his comments in relation to Ulster Bank's recent loan book trades to Cerberus that reminded me of Pontius Pilate:

When asked if he had any sympathy for the companies whose business loans had been sold to private equity companies, his response was;
"Some of the assets are better off in somebody else's hands that can nurture and create value over a longer term than we can. Some of the loans will be developed and more money poured into them than we would have been able to do in a shorter period of time."

There is no doubt that RBS and Ulster Bank have had their fair share of problems to deal with in terms of their legacy debt position on the back of the property crash in Ireland. Ulster Bank in particular has been a very expensive thorn in RBS's side in this regard.  However, I do believe that Mr. Mc Ewan’s answer to the question posed was both misleading and disingenuous.  He is very aware that the private equity companies who now own much of the country’s real estate are not banks and do not provide the services of high street banks to the business community.  He is very aware that they are looking for a quick exit from these positions and unless the business community can refinance their positions away from the private equity companies, then they are in trouble.

It has come to light in the last number of weeks that there are potentially thousands of companies now in the unfortunate position of not having the support of their bank.  This is a very stressful situation that many now find themselves in.

It's now imperative that if your loan has been sold, that you understand the process and get a new capital partner in place as soon as is possible.  Our own company has been able to help a number of businesses in this regard, but from a Northern Ireland economic point of view, it's crucial we find out from Ulster Bank how many businesses we are talking about.  If we knew that, then we could work out the number of jobs involved and then maybe go about setting up a support network to help those affected deal with their private equity positions in a professional, successful manner.

The private equity companies, although unregulated, which is concerning, are carrying out their business as they always do.  They buy loans for discount, fix them up and sell them on.  We know this.  However, it's very important that the business community get familiar with the process and get the financial support from local banks and other more innovative/alternative sources of funding, which will allow them to safeguard their businesses and also the jobs which are ultimately the heartbeat of any economy.

In the last few weeks, our own business has been inundated with enquiries from people now in this position and we are now working through the cases hoping we can achieve successful outcomes for all those involved.  With billions of pounds of property loans having been traded in the last eighteen months, it would seem that this is going to be a very active space and one where GDP Partnership can add significant value.

 

Conor Devine MRICS

Twitter handle @Conor_Devine