UK PM Gordon Brown and Scotland Secretary Jim Murphy visit Allied Vehicles in Glasgow, February 25, 2010

UK GDP (gross domestic product) for the fourth quarter of 2009, was revised up to 0.3% from the third quarter, compared with a previous announcement of 0.1% growth, the Office for National Statistics said today in London.

The rise in growth came as services output was upgraded to 0.5%  from an original estimate of 0.1%. Industrial production growth was revised to 0.4% from 0.1%. Consumer spending rose 0.4% in the biggest increase the first quarter of 2008, and public spending increased 1.2% while fixed capital investment fell 3.1% on the quarter. The economy contracted 6.2% since the first quarter of 2008, the worst recession on record.

NAMA: The European Commission is due to announce whether it approves the Irish bad bank for toxic assets, the National Assets Management Agency (NAMA) today. The new competition commissioner, Spanish national Joaquín Almunia, who previously held the key economic and monetary affairs portfolio, is expected to give NAMA the go-ahead following a staff internal review.

There may be proposed modification from the  Commission and assuming that they would not be significant, the approval would allow the commencement of the transfer of loans of major developers from the banks, which may eventually be valued at more than €50 billion, on transfer of all toxic loans. Last week Finance Minister Brian Lenihan said he expected the transfer to happen by the end of March.

Weak US manufacturing and employment data cause markets to falter: Davy analyst, Barry Dixon,  commented today  - - "Weaker-than-expected underlying durable goods orders and higher-than-expected initial jobless claims combined to unsettle the market yesterday.

While headline orders growth of 3% was ahead of expectations, it included a big spike in both aircraft and defence orders. Excluding aircraft orders, demand fell by 0.6%, worse than the 1% growth expected. The December figure was upgraded however from 1% to 2%.

Excluding both transport and defence orders, a measure which is a good proxy for private business investment, orders declined by 2.9%, a disappointing outcome following the 3.3% increase in December.

Inventory levels were flat, suggesting that the de-stocking cycle may be coming to an end, which is positive for medium-term demand.

Jobless claims data also disimproved, falling to 496,000 last week from 474,000 the previous week. While this may be weather-related, it may also indicate the slow pick-up in manufacturing. Weak employment data continue to drive fears that a consumer recovery is still some way off."

Bank of Ireland rates:  BoI announced on Thursday rises in rates and fees :

• The bank will increase the interest rate it charges personal customers for an overdraft from 13.7% to 14.8%, including the €25 fee for setting up an overdraft.
• Account holders who overdraw without approval will pay an additional penalty interest rate charge of 7.2%, bringing the total interest on an unauthorised overdraft to 22%. The new higher rates will take effect from April 28.
• The bank also increased personal loan rates, from 12.4% to 13.5%. For amounts of €10,000, the rate rise is lower.
• The third-level student loan and overdraft rates will both rise from 10.8% to 11.9%, while the graduate loan and overdraft rates will go up from 8.7% to 9.7%.

"Banks have been sending out clear and consistent messages that their balance sheets are in poor shape and have said they need to increase interest rates they charge their customers to cover losses. Up until now, the largest of the national banks have held back on increasing charges to consumers but that hesitancy has ended…new ground has been broken and it is now likely that other banks will follow suit and include mortgages in that mix,"said Frank Conway, Director at Irish Mortgage Corporation.

In terms of mortgages, those who hold standard variable rate mortgages are most at risk. "Banks reintroduced standard variable rate loans in late 2008 so they could increase interest rates as circumstances warranted. Mortgage holders who hold standard variable rate loans must now begin preparing for higher mortgage repayments in the months and years ahead" said Conway.

A 1% rise in interest rates on a loan of €250,000, current interest rate of 3.5% over a 30 year loan term would result in the mortgage repayment increasing from €1122.61 to €1266.71 - an increase of €144.10 per month.

"In addition to a raft of increases, from home and car insurance to health premiums, a significant increase in mortgage repayments may be a bill too far for many struggling homeowners," said Conway.

Reading between the lines though, it’s clear that the Commission remain very cautious about the nascent recovery and cite numerous headwinds in store for the year ahead, despite asserting that the risks are broadly balanced. It points out the temporary nature of the factors that are underpinning the recovery at present and believe its robustness has yet to be tested. As such, were a weakening in output growth later in the year to materialise, this would not be overly surprising. In its view, the upswing will gain momentum only towards the end of 2010. It also cites the escalation in concerns surrounding government finances as representing the single largest change since its last time out and this shift may have more adverse impacts than currently assumed. In addition, the continued fragile state of the banking system presents the risk that lending to the domestic economy later in the recovery could be limited.

In all, the downside risks are numerous, with the central upside risk to forecasts stemming from a more pronounced upturn in global demand than currently envisaged, rather than from any domestic factor. In this regard the Commission point to the vigour of the recovery in emerging markets, which has been especially impressive in its view. Following the IMF outlook last month, (where forecasts were upgraded for the third consecutive occasion), this assessment presents a more sobering view on the near term economic outlook, in line with the more cautious view taken by equity markets in the year to date. With more detail to follow in its Spring forecasts, it’s clear, that for now, the Commission is looking at the glass half empty."

Lloyds Banking Group: The UK bank in which the British government has a  41.3% stake, today reported losses of £6.3 billion sterling in 2009.

The UK prime Minister Gordon Brown had proposed the disastrous merger of Lloyds with HBOS after the collapse of US investment bank Lehman Bank in September 2008. HBOS was the owner of  Bank of Scotland (Ireland), and its retail brand Halifax, which is being terminated in Ireland.

LBG today said it continues to have ongoing concerns with regard to the outlook for the Irish economy although it expects 2009 to have been the peak for the impairment charge.

Impairment charges in its Wealth and International division, including the Irish operations, rose to £4 billion last year, compared to £731m in 2008. The bank said this development reflects the significant deterioration in the credit risk environment in Ireland and Australia.

Of theses impairment losses, the bank said that £2.95 billion arose in Ireland "which experienced a significant deterioration in asset values driven by the collapse in liquidity and severe decline in the property sector." This compares to £526m for impairment charges in 2008.

It said that Irish commercial property values fell by over 50% and house prices by over 25% from their peak.

The bank's gross loans and advances to Irish customers fell to £29.1 billion from £31.4 billion in 2008.

Goodbody analyst, Ken Darmody, commented today: "Lloyds Banking Group has announced FY09 results this morning. On a combined business basis, it reported a loss before tax of £6.3bn, which is better than consensus. The revenue line is stronger than expectations, with £24bn in earnings and the net interest margin improving 11bps in H209 to 183bps. Core Tier 1 has improved to 8.1%. Impairments of £24bn for FY09 (consensus c£23bn) were 21% lower in H209 than H109. Management comment that it expects the pace of this improvement to continue for each half year through 2010. Ireland is specifically mentioned with the comment with the comment that it “remains cautious on the Irish portfolios, given the uncertain economic outlook”. Impairments in Ireland were £2.9bn in FY09 (£526m in FY 08). In their wealth and international division deposits have decreased by 15% primarily due to outflows in Ireland reflecting aggressive pricing from competitors who have benefited from the Irish Government deposit guarantee. In relation to the outlook for the group, management reports that “the economy is showing signs of stabilisation, with a weak upturn expected in 2010.”