Goodbody poised to become primary dealer in government bonds

Goodbody Stockbrokers is advancing a plan to apply to the National Treasury Management Agency (NTMA) to become a primary dealer in Irish government bonds, taking advantage of larger rival Davy's exit from this business in the wake of a trade scandal earlier this year.

Goodbody, acquired by AIB in September, has hired Garret Grogan, a former head of global trading at Bank of Ireland, who has worked as a bonds specialist for Bank of Montreal in recent years, to become its head of fixed-income trading.

The stockbroker has also tapped Bank of Ireland fixed-income products trader Thomas Duffy to become a senior trader.

"The hires are significant for Goodbody following the acquisition by Allied Irish Bank as we look to become a primary dealer in Irish government bonds and expand our offering to corporate and institutional clients over the coming months and years," said Colm Ryan, head of fixed income at Goodbody.

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An initial assessment carried out earlier this year by Goodbody for AIB, led by chief executive Colin Hunt, concluded that it was imperative that the brokerage become a primary dealer in order to develop a credible bond, or fixed-income, offering for companies. It said that the firm would need to build up a small debt capital markets team to complement its equities business.

Syndicated bond deals

Prior to the new appointments, Goodbody had a small two-man bond desk. Primary dealers typically break even at best handling regular auctions, but stand to make considerable amounts in fees in managing larger bond sales, or what are known as syndicated bond deals.

Davy was essentially fired as a primary dealer by the National Treasury Management Agency (NTMA) in March after it was fined by the Central Bank in relation to an Anglo Irish Bank junior bond trade going back to 2014. This has left the State with no Irish-owned financial house among 14 international banks and securities firms approved to be involved in the sale of debt for the State.

Davy would have made about €4.5 million in fees from being one of six managers involved three syndicated Irish government bond deals between early 2020 and early 2021.

Bank of Ireland, which lost its role in the primary dealership market with the sale of its former unit Davy back in 2006 to the brokerage’s management staff, has looked at a number of occasions over the past decade at getting into this market. Sources said earlier this year that the bank was giving the matter fresh consideration, even as it prepared to takeover of most of Davy’s business. It is believed that the issue has not advanced much since then.

“Bank of Ireland’s primary focus at present is on progressing with the Davy acquisition and in clearing all the required regulatory stages to complete this transaction,” a spokesman for the bank said.