Wednesday 18 September 2019

Anglo share price dropped by nearly half after results, trial told

David Drumm denies taking part in a plot to defraud. Picture: Collins
David Drumm denies taking part in a plot to defraud. Picture: Collins
Andrew Phelan

Andrew Phelan

Anglo Irish Bank's share price dropped by nearly half the day after it released a summary of its 2008 financial results to the stock market, a trial has heard.

The price went down 28pc on the day the bank's preliminary year-end figures were published, but went on to drop by 48pc the next day.

Stockbrokers asked to analyse the results said if €7.2bn was taken from Anglo's customer deposit total, it would have negatively affected the bank's loan-to-deposit ratio - a "key metric" for investors.

Financial analysts Eamonn Hughes and Ciaran Callaghan were giving evidence in the trial of Anglo's former CEO David Drumm, who is accused of taking part in a plot to defraud during the 2008 financial crisis.

Mr Drumm (51) denies conspiring to dishonestly create the impression that Anglo's customer deposits were €7.2bn larger than they really were in September 2008.

The case at Dublin Circuit Criminal Court centres on a series of interbank deposits that circulated between Anglo and Irish Life and Permanent.

Mr Hughes, of Goodbody Stockbrokers, said Anglo's preliminary results were released to the stock market on December 3, 2008. His firm's analysis gave Anglo's share price at 94c. The year-on-year deposit growth figures were down 2pc, while loan growth was up 9pc.

A second analysis a day later had a share price of 67c.

It stated that "progress must be made on Anglo's loan-to-deposit ratio" (LDR), which had gone up to 140pc and was "higher than anticipated".

Paul O'Higgins SC, prosecuting, asked Mr Hughes what the effect on the LDR would have been if you took €7.2bn from the deposits figure.

"That ratio would go up by 23pc points to 163pc," he said.

On December 4, the share price dropped to 48c, which was just short of a 50pc fall.

"A higher loan-to-deposit ratio would be perceived more negatively by the market," Mr Callaghan, of NCB stockbrokers, said. He agreed with Bernard Condon SC, defending, that there were other metrics in a bank's performance and a focus at the time was unpaid loans.

Mr Callaghan said if you subtracted €7.2bn from the deposits, the LDR would increase.

"It would have been a warning sign that deposits were under pressure or loans were growing faster," he said.

The trial continues.

Irish Independent

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