Challenging times force top broker to take stock

THE FRIDAY INTERVIEW: Roy Barrett, MD, Goodbody Stockbrokers:WHEN GOODBODY Stockbrokers' managing director Roy Barrett last did a newspaper interview, it was the year Titanicwon a record 11 Oscars, Bill Clinton fessed up to his tryst with Monica Lewinsky, and TV3 went on air for the first time. His favourite football team Leeds United were playing in the Premier League.

It was also the year the punt was traded for the last time before making way for the euro.

With the euro currently teetering in the wake of the global financial crisis, it is perhaps appropriate that Barrett has come out to talk again for the first time since 1998.

“It’s been about 13 years, mmm,” Barrett says impassively. He nods his head slightly, but offers little else by way of explanation for his shyness. Barrett is a low-key chap. He is said to enjoy an after-work pint on a Friday evening in Mary Macs pub beside Goodbody’s posh offices in Ballsbridge.

When asked about his personal interests and career background, he sprints through the details. Born and raised in Dublin, he went to Blackrock College, studied law in UCD and then did an MBS there. He says an interest in stock markets led him away from law.

Barrett went to London in 1987 to work for SG Warburg, two months before the markets crashed. He returned to Dublin in 1990 to work for NCB and joined Goodbody four years later.

He was appointed managing director in 1996. His hobby is watching sport – football and horse racing are his favourites.

This is not to suggest that Barrett has nothing to say for himself. Over the course of about two hours in a meeting room on the fifth floor of its offices, Barrett opined on Goodbody’s future, consolidation in his industry, the woes of former parent AIB, the economy, our chances of repaying our sovereign debt, and his admiration for financier Dermot Desmond, with whom he worked at NCB.

Every sentence was carefully considered and delivered in a measured way. There was no waffle or hyperbole but quite a bit of shifting uncomfortably in his chair and arm folding. By the end, he appeared relieved that it was over.

These are tough times for Irish stockbroking. At its peak in 2007, about €200 billion worth of equities were traded. Last year, that figure was €50 billion. It continues to decline.

“It’s down by 25 per cent in the first four months,” he says. “It’s a huge dislocation.”

Overall, Goodbody’s revenues are down more than 50 per cent from peak, Barrett adds, without giving any clue as to the actual figure. When asked if Goodbody is profitable, Barrett says it is “there or thereabouts”.

Goodbody’s private clients division is quiet, he says. This is no surprise given the destruction in wealth of the past four years. While corporate finance is busy, deals are slow to close. All that said, Barrett views the glass as half full.

In January, the broker changed hands, with Kerry-based Fexco paying €24 million to buy it from AIB. Barrett and more than 30 other staff have a 25 per cent stake and could get another 24 per cent if certain targets are met over time.

On the decision to link up with Fexco, Barrett says he was impressed by the Kerry company’s entrepreneurial and commercial culture.

“Equally, they had the capital to support the acquisition and the plans we have for the business,” he adds.

New blood has been injected into the business and the broker has mapped out a growth strategy. This follows a few years of stagnation due to the flux at AIB.

“That was a function of where AIB found itself at the time,” Barrett explains. “There were hiring freezes and, as a consequence of that, a business goes stale. There was no new blood coming in with fresh ideas and I suppose our business, to varying degrees, would have suffered because of that.

About 50 staff have left Goodbody since the change of owner, mostly by voluntary redundancy. But it will shortly open a bond desk, having poached two senior staff. And it has hired new analysts to focus on international stocks where it believes it can add value to institutional investors overseas.

The focus is on gaming, airlines, paper and packaging, building materials, oil and gas.

“Where we are adding people is really adding analysts who are capable of delivering product to those [international] institutions,” Barrett explains.

This is a path already taken by its competitor Davy. Is Goodbody merely aping its biggest rival?

“No. They have a much broader ambition on coverage. Our ambitions are tailored to the type of analysts we are capable of recruiting.”

Fexco’s execution-only stockbroking business will next week be folded into Goodbody, with six staff moving over.

If things had worked out differently, it might have been Barrett rather than Eugene Sheehy and Colm Doherty who is the subject of public opprobrium for their parts in the banking crash.

In 2005, he was encouraged by AIB’s top brass to throw his hat into the ring to succeed Michael Buckley as chief executive. Barrett says he got a “pretty long way down the road” in the interview process. “As to how far I got in terms of a reasonable chance of securing the position, I don’t know. But I’d say I was down to the last three or four. I think.”

This was Barrett’s first job interview in 16 years, having ignored other potential opportunities for advancement within the bank.

The “challenge” of the chief executive role “interested me and intrigued me”, he says. Barrett lost out to Sheehy. His line boss at the time, Colm Doherty, was also in the mix.

On reflection, did he dodge a bullet? “With the benefit of hindsight I dodged a bullet, yes. It would be hard to say that you would have done things so radically different.”

Barrett might be considered lucky because a couple of years later, around 2006/07, speculation was rife that Goodbody’s management team would follow the example of Davy and lead a buyout of the firm. Barrett says Goodbody was valued at a frothy €200 million at the time but Sheehy and Doherty wouldn’t let the business go.

“It wouldn’t have been good for our business on the basis that it would have been a management-led buyout that encumbered both the business and the individuals with a lot of debt, which would not be a good place to be.”

As a former senior executive within AIB – albeit, at one remove from the main action – what does Barrett feel went wrong with his former parent group?

“They over-extended themselves in terms of what they lent, largely to one sector, namely the property sector.”

It’s hardly a revealing answer given what we all know now. While it’s easy to be wise after the event, didn’t Barrett and his colleagues see the writing on the wall at the time?

“Em, it wouldn’t have been as obvious to me that they would have been extended to the extent that they were,” he rebutts. “It was subsequent to the time of those [chief executive] interviews that they became more aggressive in their lending to the property sector. A lot of the problems in terms of their loans books were loans that were extended from 2005 to 2007.”

Sheehy was forced out in 2009, only to be replaced by Colm Doherty, after a protracted search for a new chief. Taxpayers were outraged. What was Barrett’s view of the decision to appoint from within?

“My view at the time, was that, where possible, they should have appointed somebody outside of AIB. Whatever the relative merits of any individual, my view would have been that the organisation would have been better served by some way having a cleaner break with the past.”

As a caveat, Barrett adds that Doherty “certainly had the ability” for the top job at AIB. It was simply a case of the bank needing to break with its past.

What about Goodbody’s role in the boom? Many of its clients are nursing big losses on investments put their way by the broker. Was Goodbody part of the problem?

“Many of those property investments have turned sour and many have seen significant if not wholesale reduction in value. But we didn’t enter into them on the basis that they were good for Goodbody and we didn’t enter them on the basis that we were flag waving for anybody. We sought to bring well structured investment propositions to the customer.

“In good faith, we thought what we were structuring and providing to our clients were good investment opportunities. It just so happened that, unfortunately, they weren’t.”

Did Barrett make lots of money in the boom?

“We did okay, yeah,” he says.

Has he lost a lot in the crash?

“Not really, no. There are many times there’s an investment you can’t make because you are conflicted. I tended not to get involved in property stuff or whatever. I just concentrated on the job.”

Barrett is 15 years in the hot seat at Goodbody and shows no sign of wanting a change.

“My career plan is to make Goodbody work for everybody, be it Fexco or those who work here. I love the business. I like the people in it, it’s very challenging. Every day is different so you never get bored.”

On The Record

Name: Richard Barrett

Age: 47

Lives: Raglan Road, Dublin

Family: Married with four children

Hobbies: Running and watching sport. He's a Leeds United fan

Something we might expect: He is on the board of the Irish Stock Exchange

Something that might surprise: He ran a marathon in Prague two years ago after following an 18-week training plan. His time was four hours 20 minutes. "I might do one again but I'd have to think about that"