Bank investor expects to triple cash in few years
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The Irish Times - Monday, February 20, 2012
NIAMH SWEENEY in Palm Beach
WILBUR ROSS, the US investor who bought 9 per cent of Bank of Ireland last year, has said he expects to more than triple his money in the next few years.
Mr Ross told the annual winter meeting of the Ireland-US Council in Palm Beach, Florida, that he expects the bank – which reports its 2011 results today – to sell for roughly three times its current market value once economic conditions improve in Ireland.
“In a couple of years when the loan portfolio and the economy have been cleaned up, we believe that the largest bank in an economy as healthy as Ireland’s then would sell at 1½-times book value,” he said at the prestigious Beach Club in Palm Beach.
Mr Ross and his co-investors bought 35 per cent of the bank’s shares at 10 cent each – less than 40 per cent of book value. Bank of Ireland shares finished trading on Friday at 14 cent a share. Mr Ross believes the company’s book value is closer to 26 cent a share.
Speaking following his Palm Beach address, Mr Ross reiterated his support for the bank’s chief executive, Richie Boucher, in the face of a forthcoming “fitness and probity” test by the Central Bank. The test will seek to determine the extent of Mr Boucher’s involvement in the events that led to the banking crisis. “We think he’s the right person to be running the bank at this point in time. We also think it’s important for the country to be looking forward rather than just looking backward.
“There was plenty of blame to go around for all sorts of things that were done wrong, but right now should be a period of healing, a period of rehabilitation, a period of getting on with it.”
Mr Boucher oversaw commercial lending – including property development – at the bank in the lead-up to the crisis.
Bank of Ireland was the only Irish bank to avoid State control after a consortium of investors bought 34.9 per cent of the bank’s shares last July. The group was led by Toronto-based insurer Fairfax Financial Holdings and included Mr Ross’s New York buyout firm WL Ross and Co, Boston-based Fidelity Investments, the Los Angeles-based Capital Group and Californian property firm Kennedy Wilson.
The investment has since been repeatedly lauded by the Government as a “vote of confidence” in the bank and economy.
Mr Ross told the gathering of wealthy US business people the best way to help the Irish economy would be to make a bank deposit.
He said small and medium-sized firms were the key to tackling unemployment in Ireland, and that liquidity problems in the banks were holding them back because they could not access funding.
“I would be happy to have you own the stock, but the best way to help the Irish economy would be to make a deposit...Please give some thought to doing that,” he urged, adding that a “major American corporate depositor” had recently agreed to waive the Government guarantee on bank deposits in return for a higher rate of interest, illustrating a newly returned confidence in the bank.
He and his co-investors had invested for the long term. “We’re not a hedge fund that’s just trying to flip things. Generally speaking to get a bank turned around is a three- to five-year process, so whether that’s the right time denomination here nobody knows but it certainly isn’t 10 minutes or six months or one year.”
The financier had high praise for the policies pursued by the Government, describing Ireland as “the IMF’s poster boy for belt-tightening”, and complimenting the Taoiseach on being “a really inspirational speaker”.
He told those gathered for the Ireland-US Council lunch that at the Bill Clinton-sponsored Invest in Ireland conference, held in New York the previous week, Enda Kenny’s speech had people so “pumped up” they were “ready to run through walls”.
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