'Onwards and upwards' for Bank of Ireland

Despite his sceptics, Michael Soden says his strategy is very clear, writes Siobhán Creaton, Finance Correspondent.

Bank of Ireland chief executive Mr Michael Soden has taken a fair few body blows in recent weeks. His attempt to take over Britain's sixth-biggest bank, Abbey National, failed to win crucial support from investors and left many of them wondering where this newcomer to Irish banking is taking his new charge.

Mr Soden (55) shrugs off the criticism and light-heartedly says he thinks he is great.

"People say to me are you hurt, are you cut up? I say not at all. This is business. It's onwards and upwards from here. I won't stop. I am trying to help the organisation to grow and I will take on anyone or anything that tries to prevent me from doing it."

His appointment as Bank of Ireland's chief executive, a position he assumed in March 2002, came as a great surprise and was viewed as a brave and impressive appointment by a deeply conservative bank.

Originally from Dublin, Mr Soden came to the bank following a highly successful career in the UK, US and, most recently, Australia, where he was one of the top executives at National Australia Bank.

Some have told him that Irish banking has become a lot more interesting since his arrival. For all of that, there are others who are now questioning his credibility.

He has certainly made the headlines. In his first week as chief executive he shocked everyone by suggesting that Bank of Ireland and AIB should merge to create one large Irish bank. This notion, which one competitor described as nothing short of "fantasy", has been buried but Soden feels no regret or embarrassment about his idea.

"It's run its course. I'm sure, please God, that I will get to retirement and people will still say to me: remember that thing you launched? And I will say it's still flying. Why should I get shot for having ideas? I don't believe anything will be done in this country unless it is debated. I have aired it. It was worth a discussion."

A few months later he had set his cap at Abbey National. Together Bank of Ireland and Abbey National could have become Europe's 13th-largest financial institution and one of the leading stocks listed on the FTSE 100 share index.

The approach was never seriously entertained by Abbey. News of Bank of Ireland's tentative overtures to Abbey chairman Lord Burns were leaked to the British media and portrayed as "opportunistic" and unrealistic. Its board hastily rejected the notion and simply refused to talk to Mr Soden and his team.

"We always thought they would engage but they stayed silent. Their defence was exquisite," he says.

This is the second time that Bank of Ireland has been wounded and forced to retreat from a potential acquisition of a UK bank. In 1999, Mr Soden's predecessor, Mr Maurice Keane's efforts to merge with the Alliance & Leicester were similarly scuppered. He is still a director of the bank and will no doubt be able to give moral support and plenty of advice in terms of picking up the pieces from the latest debacle.

Mr Soden says, since his arrival at the bank's Baggot Street head office, he has drawn up a strategic plan mapping out how to grow this financial institution, concluding that its opportunities were chiefly in Britain.

"Three months later Abbey issued a profits warning and we were inundated with ideas from investment bankers. They were saying: 'You should consider this because you are one of the few banks in the world that is a legitimate suitor for this company'. We said fine, we would look at it."

The proposal was presented to the bank's court of directors which readily approved it. He recalls the bank's governor, Mr Laurence Crowley, saying: "Mike, you don't just have a right to do this transaction, you have a responsibility to look at it, to ensure that we don't let something pass by that is a once-in-a-lifetime deal."

The court attached five conditions under which the deal should be done. They told Mr Soden the takeover had to be friendly, had to be recommended to their shareholders, it must be allowed to do due diligence, he had to be chief executive and, finally, the head office had to be in Dublin.

"We presented them with a proposal, not an offer. When we did that we were offering their shareholders a premium of between 18 and 23 per cent over the share price. Two weeks later we still hadn't heard from them and their share price had slumped to £5.05. This meant that the premium had soared to 40 per cent."

That weekend news of the takeover proposal appeared in the press, with sources close to Abbey stating that it would be rejected. Bank of Ireland was immediately put on the back foot. The following Monday, the Financial Times's influential Lex column was critical and unconvinced about the proposal.

Bank of Ireland shares tumbled on the Dublin and London markets as investors took fright. Abbey National shares soared on the news. The bank was once more viewed as being in play on speculation that other banks would also make bids.

"The leak described it as a nil-premium deal, not well thought out and that it was not going to work. It gathered momentum on the negative front. In the absence of information, cynicism prevailed," Mr Soden says.

Shareholders in both banks had to wait another 10 days to find out exactly what had been proposed. Bank of Ireland took the unusual step of issuing the proposal that had been presented to Lord Burns to the markets in the hope that influential investors would persuade him at least to talk to Mr Soden.

But it was too late. Bank of Ireland shares had enjoyed a "relief rally" a few days previously. The markets had already dismissed the notion as a bad deal for Bank of Ireland and not a great deal for Abbey. Yet Mr Soden and his team continued their crusade to win over key institutions such as Fidelity and Standard Life.

Mr Soden recounts his parting words to them. "At the end of all of this, I can look you straight in the eye and say, when Abbey come around to you, compare what we have said about how we could revitalise a very great brand but one that we believe is worn out or is dying. I'm not sure if they \ have the vision or the wherewithal to actually do that. Do you honestly believe that the same people who have overseen its demise are going to come up with the plan to see its rejuvenation?"

He accepts that Bank of Ireland's approach may have been opportunistic, particularly as Abbey National was without a chief executive. Last week it appointed Mr Luqman Arnold to that position to reaffirm its determination to remain independent.

Mr Soden says he has been "vexed" to hear people question whether he has a strategy for the bank. "Our strategy is very clear. Abbey National was a once-in-a-lifetime deal that you could not plan for. We do not take our eye off the ball about delivering current profits. I can accept if people say they don't agree with our strategy but we damn well have a very clear strategy."

He believes the Abbey National proposal will mark a turning point for Bank of Ireland. "People will look back and say that was a turning point for the better for this organisation because it said we are prepared to take up a challenge. Let's wait for November 14th when our results come out."