Wednesday 26 July 2017

Maeve Dineen: IL&P demise is sad because it tried to do right thing

IT may seem a little strange to create a hierarchy of sympathy but for some reason I feel much sorrier for the shareholders in Irish Life & Permanent than for those who invested in the other three listed banks.

I'm not saying I won't be unmoved when Bank of Ireland holds a shareholder meeting today that will effectively make the State the majority shareholder, but I will be a little more saddened by next week's Irish Life shareholder meeting which will pave the way for State ownership and the company's removal from the stock exchange.

Irish Life & Permanent really did look like a well-run organisation until very recently. In fact, in the scheme of bank crashes in this country, few saw this one coming.

While the mechanism is clear enough (the regulator simply demanded higher cash reserves than expected), many still don't quite understand the rationale or why management just threw in the towel two weeks ago when the demands were made.

The company appears to have been reasonably well run and can hardly be blamed for lending in the residential property market; that, after all, was its raison d'etre.

Unlike Irish Nationwide and even EBS, Irish Life & Permanent did not stray too far from its mission statement. Its life products are reasonably good.

It is true that there is something a little dull about the company -- even the logo and the management often seemed a trifle bland -- but this is hardly a sin.

In contrast, we had rather too much charisma in the likes of Anglo. And we didn't really need any more in Irish banking circles.

The one recorded instance where Irish Life strayed from this dull but blameless existence seems to have been September 2008 when its life-assurance subsidiary advanced a total of €7.35bn to Anglo, which allowed the latter to make its balance sheet look much stronger than it really was.

We still don't know whether there was a green-jersey agenda inside the government at the time that prompted Irish Life's uncharacteristic move, but I suspect there was and it doesn't bother me too much to be honest.

In retrospect, who can argue that Anglo's demise spelt the end of the other three banks? Many will argue that it was wise for Irish Life to roll the dice and try to save Anglo from itself.

Irish Life has also behaved better than the other institutions since the bust. Senior positions have been voluntarily filled by people who are untainted by what went on -- something that cannot be said about the other banks.

These are not the normal metrics by which we measure companies. I would be the first to admit they are subjective but I won't admit that they don't matter.

There is something vaguely dishonest about the other lenders, and shareholders have always known this. With numerous criminal investigations into the goings on at Anglo it is probably best not to be too specific here, but towards the end, all shareholders had a pretty good idea that something was wrong.

Anglo stank like the rotting carcass it was for months before it disappeared.

Allied Irish has always had a whiff of sulphur about it. The bank almost went belly up in the 1980s and relied on the taxpayer for survival.

It has repeatedly defrauded customers since then without too much outcry from shareholders.

Set against this, shareholders in Irish Life & Permanent had few warnings that they owned a lemon.

The lender did not need to beg for money until recently and it clearly did not engage in the reckless lunacy that others engaged in.

Most of the shareholders had, until around March, believed they had ridden out the storm.

Next week, they will have their chance to vent their anger. Usually it doesn't matter, because the all-mighty pension funds will have decided the outcome anyway, but on this occasion it really won't matter at all because the Finance Minister has decided Irish Life & Permanent's future.

Tea and sympathy will really be the only thing on offer.

Irish Independent

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