Geoghegan scathing on bank guarantee

Cantillon: divestments deprived Irish banks of fee income, says investment banker

Basil Geoghegan: adviser on options available to save Irish Nationwide at time of bank bailout.

Basil Geoghegan: adviser on options available to save Irish Nationwide at time of bank bailout.

 

Seasoned Irish investment banker Basil Geoghegan delivered a straight-talking speech yesterday morning at a seminar on the Irish recovery hosted by pensions group Invesco at the Four Seasons hotel in Dublin.

Geoghegan said what most people here have been thinking for a number of years, namely that the blanket bank guarantee issued by the State in late September 2008 by the Fianna Fáil government was madness. His comments carry added weight given that he had an advisory role at the time with Goldman Sachs (he now works for US bank Citi).

As an adviser on the options available to save Irish Nationwide, which like the other Irish lenders at the time was on the brink of collapse, Geoghegan was in the room, so to speak, when the fateful decision was made, although he wasn’t directly advising the Government.

His point that the decision was compounded by the European Commission’s insistence that it amounted to state aid is well made.

Ireland’s solo run on the guarantee left us with few friends in Brussels or Berlin, London or Paris at the time.

This led to AIB, Bank of Ireland and Permanent TSB having to submit restructuring plans that eventually involved them having to sell much of the family silver in order to get the green light from the Commission. In fact, PTSB is still waiting for that approval and arguably has been worst hit by the decision to separate it from Irish Life, which was sold last year to Canada’s Great West-Lifeco for a snip at €1.3 billion.

If anything, the guarantee turned out to be a bailout of other institutions in Europe, with the banks here left treading water for five years.

Geoghegan’s point was that these divestments robbed the banks of valuable fee income, a vital component when trying to restore profitability and build a capital buffer to satisfy regulatory demands.

“So they are now all focused on net interest margin,” Geoghegan said. That’s a tough slog in the current low interest rate environment, especially with the funding drag of tracker mortgages, which is particularly acute in the case of PTSB.

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.