AIB profits from Davy train wreck

Broker’s missteps makes bank’s timing of Goodbody’s purchase look prescient

  AIB chief Colin Hunt and his team must hardly be able to believe their good fortune.   Photograph: Aidan Crawley/Bloomberg via Getty Images

AIB chief Colin Hunt and his team must hardly be able to believe their good fortune. Photograph: Aidan Crawley/Bloomberg via Getty Images

 

Sometimes it can seem as if you have the magic touch. And that’s how AIB must feel this week as corporate Ireland surveys the train crash that is Davy stockbrokers.

Having paid €138 million to buy back Davy rival, Goodbody’s, just over a decade after it was forced to sell the firm as part of its State bailout, the bank would have been anticipating a protracted campaign to increase its profile and compete with the market’s dominant player.

Now Davy has done a good deal of the hard work for it. Colin Hunt and his team must hardly be able to believe their good fortune.

Goodbody’s job has been made easier by a series of catastrophic missteps on Dawson Street.

Davy had seven years to prepare for the Central Bank decision on a rogue bond deal that should never have happened in which a group of Davy staff sought to profit by playing the other side of a deal from the firm’s own paying client.

Given that the chief executive at the time, his successor and his one-time joint managing director were among the group that played fast and loose with the rules on at least this one occasion, there could be no excuse that decision-makers were caught on the hop by the scale of the issue.

Reaction

In simple management terms, the reaction of the firm to the decision a week ago today showed ineptitude. It failed to prepare for the inevitable questions that would come from Government and clients, possibly deluding themselves everything could all be smoothed out behind closed doors.

The arrogance of the Davy operation was evident in the statement to staff on the day a record fine and stinging rebuke was issued by the Central Bank. Chief executive Brian McKiernan reassured staff “there are no findings of actual conflict of interest or customer loss” only to have to reissue his entire statement again later, pointedly without those words, on Central Bank instruction.

He also said the shortcomings in how the deal was handled “could not recur today”. One week on he and two senior colleagues have resigned and it remains to be seen if clients are reassured on this issue. Clearly it was all a step too far for the National Treasury Management Agency for one.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.