Thursday 21 September 2017

Investors take control at the Bank of Ireland

THE boardroom reshuffle at Bank of Ireland indicates that the North American investors who paid €1.1bn for a 34.9 per cent stake last July will in future be taking a much more hands-on approach. While BoI may have avoided State control, its new owners will be keeping it on a very tight leash.

Last Wednesday, BoI announced that former Lloyds executive Archie Kane would be taking over as chairman. However, far more significant was the appointment of two new non-executive directors, Wilbur Ross and Prem Watsa.

Messrs Ross and Watsa are the two main members of the consortium which bought into Bank of Ireland last year, with each of them holding a 9.3 per cent stake. It is understood that both Mr Ross and Mr Watsa were voted on to the Bank of Ireland board at their own request.

So why, almost a year after they first invested, have the duo appointed themselves to the Bank of Ireland board now? Could it have anything to do with the recent share price performance? After initially investing at 10c a share, the consortium then saw the value of its investment rise strongly with the Bank of Ireland share price briefly touching 15c in early February.

At that price both Mr Ross and Mr Watsa were each sitting on paper profits of almost €150m, while the consortium as a whole was €550m in the money on its investment.

Unfortunately since then the shares have fallen back to under the 10c price at which they invested, trading last week at just 9.4c. Do Messrs Ross and Watsa feel that Bank of Ireland needs the benefit of having their experienced hands on the tiller?

What is indisputable is that their appointment came in the same week that Bank of Ireland shareholders voted to approve the complex deal under which the bank warehoused the bond issued by the Irish Government in lieu of this year's €3.1bn payment due on the Anglo promissory notes.

Somehow we can't help feeling that Bank of Ireland will be taking a much more hard-nosed approach the next time the Irish Government stands in need of some fancy financial engineering.

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