Clients of AIB's brokerage firm told to exit BoI
Goodbody denies AIB share support operation
Published 07/02/2010 | 05:00
GOODBODY, Ireland's premier private client stockbrokers, switched large blocks of clients' funds out of Bank of Ireland (BoI) stock into AIB shares at a time of stock market turmoil in November 2008.
Goodbody is fully owned by AIB.
According to documents seen by the Sunday Independent, Goodbody made a "house call" in November 2008 that BoI shares should be "exited across all Goodbody discretionary portfolios". This was accompanied by Goodbody's decision "to switch the proceeds into AIB".
Decisions taken by discretionary fund managers do not need reference to the client in advance. Goodbody manages one of the biggest discretionary portfolios of private client funds in the country.
Last week, one Goodbody source said the brokers had "a couple of billion under management at the time".
Many discretionary funds are private pension schemes. In a statement to the Sunday Independent, Goodbody director of portfolio business David Lambe categorically denied that this was a "share support operation".
On Friday, he said that "in November 2008, Goodbody Stockbrokers sold some Bank of Ireland for discretionary portfolios and in some instances re-invested the proceeds in AIB.
The transactions were small in the context of the market capitalisation and (market) volumes of both companies and our funds under management.
"This investment decision was made solely by Goodbody Stockbrokers based on our views at the time as to values and future performance. It was not in any way a share support mechanism for AIB.
"Any suggestion that this was other than a routine investment decision is without basis in fact."
Any client still in AIB shares as a result of the switch is losing heavily on the deal.
Goodbody maintained that the switch was prompted by their belief that "BoI needed to raise around €1.5bn in extra capital to get its 2010 core equity ratio up to 7.5 per cent by the end of the guarantee period (September 2010)".
Last year, fund managers in Goodbody told clients that "the fact that Goodbody Stockbrokers is a wholly-owned subsidiary of the AIB group was completely irrelevant to this investment decision which was not made lightly by the Private Client Investment Committee." But in a bizarre twist to the broker's action, it has emerged that Goodbody's research team upgraded Bank of Ireland shares from an 'ADD' to a 'BUY' in November 2008 -- the same month that the "house call" was made to exit BoI shares.
Goodbody issued bullish circulars about Bank of Ireland to institutional clients.
Asked why Goodbody was issuing research recommending Bank of Ireland as 'BUY' in November 2008, Mr Lambe said that Goodbody had nothing to add to its earlier statement. Nor would they comment on why some, if not all, the switches from Bank of Ireland to AIB were carried out free of commission -- an unusual concession from a stockbroker.
When the Sunday Independent asked Goodbody analyst Eamon Hughes -- who wrote the 'BUY' recommendation on the BoI -- how his bullish report could be reconciled with a house call to sell BoI stock he replied: "I have no idea. You will have to ask somebody there."