Canadian investor in Bank of Ireland makes €566m gain

Canadian investment guru Prem Watsa's Fairfax Financial Holdings has made a CAD$806 million (€566 million) gain on its 2011 rescue investment in Bank of Ireland, leaving the Canadian billionaire on track to deliver a return that will beat that of his friend, Wilbur Ross.

Mr Watsa and Mr Ross, who became US president Donald Trump’s commerce secretary in February, led a group of investors that took at 34.9 per cent stake in Bank of Ireland at the height of the financial crisis in 2011 for €1.1 billion. This helped the lender to avert joining the rest of the Irish banking sector under State control as their level of bad loans soared.

Both investors, who each initially acquired 9.3 per cent stakes in Bank of Ireland, began to sell their investments in March 2014, within months of the bank, led by chief executive Richie Boucher, beginning to trading profitably again for the first time since the crash.

“As of today, we have sold 85 per cent of our position at 32 euro cents per share, for a total realised and unrealised gain of approximately $806 million,” Fairfax said in its 2016 annual report, signed off on by Mr Watsa last month. “Bank of Ireland is expected to announce its first dividend in the last eight years in 2017.”

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Entire investment

Mr Ross sold his entire investment in Bank of Ireland – which had been acquired at 10c per share in 2011 – between March and June 2014 at prices between 28.4c and 32.8c, realising a €500 million profit in the process.

However, Mr Watsa declined an offer from Mr Ross in mid-2014 for Fairfax to exit its remaining investment at the same time. The Canadian investor has continued to drip-feed stock into the market since then, for as much as 36c per share in 2015. However, the most recent placement, which saw Fairfax’s stake fall by halve last December to about 1.5 per cent, was priced at 23c per share.

Shares in Bank of Ireland are currently trading at around 24c and the median price target for the stock among analysts suggest it is likely to remain around this level for the near-term.

Bank of Ireland, which remains almost 14 per cent Government-owned, is likely to see its main rival AIB join it on the main stock exchanges in Dublin and London in the coming months – for the first time since late 2010.

Minister for Finance Michael Noonan has signalled that a decision could be taken next month on the State's long-awaited sale of a 25 per cent stake in AIB. Taxpayers currently own 99.8 per cent of the bank, following a €20.8 billion bailout between 2009 and 2011.