Kilroy stresses the Bank of Ireland's UK market interest

Bank of Ireland governor Mr Howard Kilroy has stressed the bank's interest in expanding in the UK, telling shareholders the breakdown of negotiations with Alliance & Leicester will not deter it from pursuing other opportunities.

Addressing more than 400 shareholders at the bank's annual general court in Dublin yesterday, Mr Kilroy expressed the court of directors' full confidence in its chief executive, Mr Maurice Keane, and his senior management team. They will continue to receive its full support in the further development of the business, he said.

During the meeting, shareholders were given little in the way of any fresh insight into the bank's thinking behind the A&L deal or the reason for its ultimate demise. Opening the meeting, the governor said the 1990s has been a decade of major innovation at the group.

"We have entered new markets and exited some others. We have developed successful new businesses and have made very good acquisitions. There has been a high level of continuity in the management team throughout the 1990s and Bank of Ireland has management strength in depth which compares with the best in the business."

Mr Kilroy explained that it was against this background, and its stated preference to grow its business in the UK, that it had entered into discussions with A&L. The deal would have moved the bank into a new level in terms of its size and market share, he said. "It met our strategic objectives as to scale, location, customer base and complementarity with our existing operations. There were substantial cost and revenue synergies and they could have been realised.

"In the wider context, the directors believe that European banking has entered a period of consolidation, already evident from merger activity in a number of states. A merger of the nature contemplated was one means, although not the only one, of leading that process rather than being led by it." The governor blamed the leaking of details of the negotiations to the media for making it "very difficult and "ultimately impossible" to resolve some of the cultural and governance difficulties that emerged.

"It is in the nature of such initiatives that a high proportion do not reach conclusion. We will not be deterred from pursuing further opportunities and I can assure stockholders that we have a clear strategic focus which has not materially changed as a result of this experience."

One shareholder, Mr Neil Duggan, made some further inquiries, asking the governor how much the initiative had cost and how much of the bank's commercial details had been exchanged with A&L.

The governor said the costs would be "modest" as it was not liable to pay any fees to the investment bank in cases where a deal was not concluded.

Mr Kilroy said it was management's job to pursue opportunities for the bank and a corporate development department was solely focused on these strategic objectives. "We would pursue 40 possible transactions every year. Some 25 may go to due diligence or perhaps trigger an introductory offer, while only a small percentage would close," he explained.

And he assured shareholders that, while sensitive information had been exchanged with A&L, both companies had signed confidentiality agreements. "I do not believe they (A&L) will violate that disclosure."

The governor was upbeat throughout. Early on, he reminded shareholders what a good investment their Bank of Ireland shares had proved to be.

"One hundred pounds invested in Bank of Ireland stock on this day in 1990 was worth £874 yesterday and has earned almost £80 in dividends," he said, putting the bank in the top three of its European peer group over three to five years.

The handful of disgruntled shareholders who took issue with the bank were more concerned about bank lending policies and what was happening to the walled garden owned by the Bank of Ireland in Westport, Co Mayo, than with the failed A&L deal.

Mr Kilroy reassured them that he was satisfied its lending practices were prudent and profitable for shareholders. And he agreed to take on board local concerns about the future ownership of its walled garden in Westport.