Boucher feared a 'plague of locusts' in deposits flight
As Ireland was being bailed out last year, Bank of Ireland was worried "a plague of locusts'' would take away its remaining deposits, CEO Richie Boucher said yesterday.
Speaking at a conference in New York, Boucher said 2010 was a traumatic time for the bank. But deleveraging of its balance sheet was now ongoing and he expected to announce further deals later this year.
Recalling the crisis through 2010, when the bank lost €20bn in deposits, Boucher said,"we felt at that stage that no matter what we'd done, all that was missing was a plague of locusts to come and eat all our cash in our safe deposit boxes".
Bank of Ireland was just one of the lenders losing vast deposits last year, with Anglo Irish Bank and AIB similarly impacted. The ECB and Irish Central Bank had to replace much of the precious funding, eventually forcing Ireland into taking a bailout.
In October, Bank of Ireland sealed a number of deals to sell €4.5bn of assets, allowing the bank to start repaying central banks that have been providing it with emergency funding.
The bank is trying to sell €10bn of assets between now and 2013 and the latest deals go a long way toward that goal.
The €4.5bn proceeds are most likely to go to the Irish Central Bank, which has been giving the lender emergency liquidity assistance since last year. The ECB may also be paid off as part of the arrangements.
Sell-offs have benefits and drawbacks for the bank. Selling the assets means the bank no longer has to put reserves aside in case the assets reduce in value. But equally, the assets produce income, so selling them will reduce the bank's annual earnings.
The bank's US commercial real estate portfolio was sold to Wells Fargo for $1.13bn (€815m), with the bank saying the price received "reflected the high quality of the portfolio''.
Its UK commercial real-estate loan portfolio was sold for £1.07bn (€1.21bn) to Kennedy Wilson, the US fund that has already purchased BoI assets.
This company, listed on the New York Stock Exchange, is a shareholder in the bank. To make sure of no conflicts in this relationship, the bank said it commissioned a fair-value study before it sealed the sale.