Brits want to sell UB to Paddy


#277

An example in a small business context: at the end of the year I do my audited accounts and I have a €1000 invoice outstanding to Mr Anderson for cigars I sold him. This invoice is an asset because it’s money owed to me. My auditor asks me if I’m really going to get this money back. I concede than Mr Anderson is a deadbeat, has had a receiver appointed, and has fled to his Cape Verde apartment. Therefore it’s uncertain that I will recover the money, but I’ve appointed a bounty hunter to go find him so I’m not ready to completely write it off. I’m in the same situation with Luan and Barney Gumble, too. The auditor and I agree that one of them will probably end up paying, but not all three. I provision for €2000 in bad debts to cover the three of them. That €2000 is an expense and reduces my profits for the year (which is nice because I then don’t have to pay tax on that amount).

But lo and behold, my bounty hunter comes through and drags two of them back, at which point I have them attached and committed until they pay. I end up getting and extra €500. This €500 that was previously a bad debt provision can now be written back, i.e. the provision reversed. It counts as income (the opposite of an expense, which his what the provision was). That’s nice because it looks a bit like real money I earned if you just glance at the media reports of my accounts.

Provisioning for loan impairment is an essential part of correct bank accounting but is also a slush fund since it can be completely subjective who is going to pay and who isn’t. There are meant to be uniform rules about what to provision for but for realz the banks can manipulate the numbers. If you’re already having a shitty quarter it’s quite handy to lob in some extra impairments that you an release later to make yourself look good down the road. etc. Works well when you have new management etc. Write stuff down, blame the old guys, then release it next quarter and take the credit.


#278

You’re missing the bit where you gave them 2000 in the first place and the promise of them to pay you back is an asset. Hours worked written off aren’t an asset until, as you say, you write them up as so in your books, but it’s only the next year that the previously recognised profit becomes a loss (you have to have had a year end where the invoice looked likely to be paid so could be treated as an asset). No?


#279

Well I was simplifying it as a sale rather than a loan and also sticking to two account periods. But yeah.


#280

Thanks folks. It is conceptually quite straightforward.

The interesting thing is that there are no clear rules on how to classify impairments/writebacks - quite a lot of scope for creativity at the margin!


#281

Absolutely and there’s an incentive to kitchen sink losses. If you’re going to have a bad year, have a very bad year. That way the next few years you can reduce impairments (boost profits) and hit profit targets… bonuses all round :frowning:


#282

Unless the very bad year exposes your bankrupt ass to the wind.
Then disclose your loses over many years, taking bailouts as they are offered.


#283

Right, so many years of bonuses guaranteed. Gift 8DD


#284

And losses from prior years can be used to offset profits in future years. So Irish banks won’t be paying any CT for the next decade while they use up those billions of losses…


#285

I think there are guidelines – I remember looking for them a couple of years ago – but IIRC they can be manipulated quite easily. For example, if the guideline is “no engagement for 90 days” you can tweak what you mean by “engagement”, or make more or fewer calls to the them, etc.

Of course the big one is that you can “restructure” a non-performing mortgage by putting them on a split mortgage, moving them to IO, or even giving them a payment holiday. Amazingly, they’re suddenly performing and you can write back the impairment, even though they’re not actually paying any more than they were.


#286

The gradual wind-down of Ulster Bank continues …

irishtimes.com/business/medi … -1.2562277


#287

RBS to Replace 550 Jobs with Robotic Automation

news.sky.com/story/1659428/rbs-c … ed-service

  • Face-to-face investment advise only available if you have 250k or above to invest, otherwise robo-advisors must be used.
  • Luvo, a AI software tool, is being rolled out for SME clients.
  • Life assurance will no longer be available for sale by staff in branches.
  • FCA makes statement in favor of automation.

#288

More Ulster Bank branches to close?

RBS to Cut 600 Retail-Bank Jobs, Close Branches, Union Says

bloomberg.com/news/articles/ … union-says


#289

Ulster Bank seeking around 50 voluntary redundancies in Northern Ireland

rte.ie/news/business/2016/04 … k-ni-jobs/


#290

Seems like an oddly small number. Why those 900?


#291

Must be some common denominator. Jumbo mortgages perhaps?


#292

On the ball there Barney.

independent.ie/business/ulst … 45799.html


#293

95% with no mortgage payment in two years.
That’s 855 houses which should be released back to the market.
The vultures buying these better ensure they get good title to the loan otherwise an awkward judge will dismiss their repossession cases but they are big boys so it is their own problem, not the Irish State’s so I don’t care.


#294

I didnt actaully read the article before I posted.

Holy Shit Batman, repo courts gonna be busy.


#295

queue derisory 100 euro payment toward mortgage which up until now being serviced.


#296

I’m all in favour of this. If Ulster Bank manage to monetize this p.o.s. financial instrument which comprises of mortgages which aren’t being serviced then it might give other banks a nudge to follow them don’t the same route and all those can’t pays/won’t pays will be out on their ear.