Thursday 15 November 2018

Fingers sidelines a sorry Soden

THURSDAY told the tale of two Michaels. Both men's bodies are for sale.

Michael Fingleton's Irish Nationwide published a cracking set of figures.

Michael Soden's Bank of Ireland bored us all to tears with another trading statement.

Michael S says his body is "well positioned to harness the positive business trends we see in our main markets and to continue to grow profits in the future". Pause for yawn.

If Michael S is "well positioned" for anything else his body will freeze with paralysis.

Perhaps studied boredom is the BoI's chosen strategy nowadays? There was a time when the mighty Soden would have looked down his nose at the humble Fingleton. Irish Nationwide was "low rent" compared with the patrician BoI.

Not so today. Fingleton's colourful reputation is being outstripped by the leader of the cartel. A trifle too colourful of late. And a bit "low rent" itself.

Two weeks ago the BoI was caught supporting a porn company. Forget the moral outrage, but question the judgement. Fingleton might fly by the seat of his pants but he would never be found backing the vice industry.

And some clown in the BoI tried to brazen out the porn fiasco by initially justifying it, before they all caved in to Joan Burton of the Labour Party and others who drew the line at bankers backing porn.

Elsewhere, the Bank of Ireland is more embarrassed than the Nationwide by the number of offshore accounts its Irish clients held in the Isle of Man and other tax hideaways. Normally, you might expect a Mickey Mouse building society to be on the Isle of Man circuit, but not the stuffy old BoI. Yet the blue bloods have gone native and are learning tribal tricks. The BoI's trading statement failed to mention any of these awkward little issues. Instead, it adopted the strategy of boredom. It desperately tried to be stuffy. And it was successful.

The numbers were pedestrian. The commentary was soporific. Well then, what was on the way? Nothing much. Except a forecast of a very dull less than 10 per cent growth in profits before tax.

There was plenty on the way down at the Irish Nationwide. The building society is on the verge of sale. The figures were sparkling. Members with adequate savings or mortgages are in for a ?7,000-plus bonanza.

Michael F's cost-to-income ratio at 21.4 per cent must be the envy of Michael S. Fingleton's return on total average assets at 2.03 per cent was far superior to Soden's at 1.22 per cent. He even leaves superstar Sean Fitzpatrick's Anglo Irish standing, with only 1.54 per cent.

All Fingleton's figures are spectacular. Pre-tax profits are up 20 per cent. Gross lending rose by 72 per cent.

Both Michaels' bodies are benefiting from the mortgage and property boom. But when it is over, where will they be?

We know where Fingleton wants to be. His ambition: to sell out to a big bank. He is priming the pump for a buyer, probably a foreigner.

We haven't an iota where Soden is heading. The reason: nor does he. Two failed ventures seem to have driven him into his shell, waiting for a saviour or - as he likes to put it - "well positioned for . . . "

The current Bank of Ireland policy is to buy back as many of its own shares as possible. Its appetite for acquisitions apparently ended by two fiascos, it is using all its spare cash to buy its own stock.

Last Thursday it had bought back nearly 50 million shares, at a cost of ?510m, at an average share price of ?10.44. On Friday night they were still losing money as the shares closed at ?10.40. The operation has been pointless. It has not yet even cancelled the shares, which, at least, would increase earnings per share for all those remaining.

What a wonderful way to spend shareholders' money! No wonder the share price has been a dog. BoI investors completely missed out on the year-long market recovery. Imagine how much lower the price would have been if the 50 million shares had not been mopped up by the house. It is a sure sign of the lack of investor confidence in the management. Was anyone else buying?

Why does Bank of Ireland not return some of its cash pile to investors? What about a special dividend? Five hundred million would not go astray.

We mugs in Bank of Ireland stock could do with the income.

Fingleton is about to return the Irish Nationwide to the punters. If he manages to sell out they will extract a return from him which we BoI shareholders will never even contemplate.

Funnily enough, Fingleton still has a few dissident shareholders barking at his heels despite his performance. It is difficult to discern their gripes or their aims, except that one of their number, Brendan Burgess, seems to want a seat on the board. But it would be sinful to upset the Nationwide applecart just as it is about to deliver the fruit. Soden could do with a few more dissidents.

Fingers has a problem of style. A spin doctor's nightmare, he has few of the social graces associated with the gentility of the BoI ascendancy tradition. He mixes with rough diamonds like Ben Dunne, Noel Smyth, Dermot Desmond, Michael Smurfit, Sean Mulryan and PJ Mara. The sort of people who make a few bob, entrepreneurs who can cut a deal. They talk business, not bull.

So what would a poor punter with twenty grand do? Give it to Michael F or Michael S?

I have already made a muggins of myself. I bought Bank of Ireland stock a few months ago at just above these levels. It seemed then that some predator would see value, pounce, cull the semi-State ethos, and sweat the BoI assets once the present incompetents had walked away with their golden handshakes.

It may well still happen. But I could have done better. I should have bought into the Nationwide. Anyone who has a spare twenty grand might still have time to "carpet bag". It needs legislation to allow Fingers to sell. It is anyone's guess whether the law will be changed, the society sold and the cash paid out within the required two-year period.

It is a small consolation that Soden's Bank of Ireland pays a dividend of 4.3 per cent at Thursday's closing levels. Fingers will not be able to match that with his deposit interest. But 4.3 per cent will be futile if my small investment keeps shrinking.

I am stuck, hoping that someone will take pity on poor Michael S. But on the basis of Thursday's spectacular statement from Michael F, the Nationwide payout could be even higher than the generally predicted ?7,000.

Michael Soden's body hardly offers such titillation.

Business Newsletter

Read the leading stories from the world of Business.

Also in Business