Bank of Ireland will conduct a detailed investigation into how its share registrar, Computershare Investor Services, miscounted the bank's recent tender repurchase of sterling and euro preference shares.
This error by Computershare meant Bank of Ireland had to repurchase 1.3 million sterling preference shares over and above the 9.3 million sterling and euro preference shares it originally offered to buy back from institutional investors.
The cost of the original repurchase was €230 million (£181 million), but the bank's decision to buy back the miscounted sterling shares will cost it an additional £23 million sterling (€38 million).
Bank of Ireland's head of investor relations, Ms Mary King, said when the bank learned of the error, it decided to repurchase all the shares for which tenders had been received and said: "No shareholder has been disadvantaged." Ms King said, however, that the bank would be carrying out a detailed investigation into the circumstances of the miscounting of the tender repurchase. She added: "If there is a financial loss to the bank, then all necessary steps will be taken to recover that loss."
Ms King said that assessing any financial loss for Bank of Ireland would be an extremely complex exercise. Market sources suggested that one possible area where there might be a financial loss would be in the pricing of the tender offer.
Bank of Ireland set a maximum price of £17.75 sterling (€28.37) for the repurchase of the sterling preference shares and agreed to accept all tenders in full at that price. If the bank had been aware of the additional 1.3 million shares tendered for repurchase, it is conceivable that the eventual repurchase price might have been lower than the £17.75 sterling that was accepted.
Computershare managing director Mr Trevor Watkins acknowledged that his company was at fault and blamed human error for the miscounting. He said that three tender forms received over the fax had not been keyed in and added: "Where you have such a big human element, things can go wrong."
He said the indications were that there was no financial cost to Bank of Ireland from the miscounting of the tender repurchase. He accepted, however, that the error was embarrassing for Computershare.
This is the second time in the space of four months that a company share registrar has miscounted a share offering, But in CRH's case last April, that company's registrar, Capita, had to take an upfront loss of €14.4 million after miscalculating the take-up of CRH's €1 billion rights issue.
On that occasion, Capita told CRH there had been a near 90 per cent response to its rights issue with the result that the 10 per cent "rump" of the rights issue was placed in the market. But Capita had omitted 8.2 million shares from its calculations of the response to the CRH rights issue and was required to find those shares in the market to meet the demands of the CRH shareholders involved.
The €14.4 million loss represented the difference between the price Capita had to pay in the market for those shares - €18.25 - and the €10.25 price of the shares in the CRH rights issue.
Capita and Computershare dominate the corporate share registry business. As well as Bank of Ireland, Computershare's major clients include AIB and Eircom. As well as CRH, Capita's major clients include Irish Life and Jefferson Smurfit.
