Standing inside the window of the Bank of Ireland headquarters on Mespil Road in Dublin, chief executive Richie Boucher offers a warm handshake and some pointers on the local sights as we look out across the canal and towards Rathmines.
“It’s a great view,” Boucher says. Indeed it is, and the view of Bank of Ireland from the outside isn’t too shabby either after a busy 2013.
It started exactly 12 months ago with the sale of the State’s €1 billion in convertible contingent capital notes, more commonly known as CoCos.
And it closed in December with the bank putting together a capital package that enabled it to hand over a €2 billion cheque to the State for its preference shares, most of which are now in the hands of private investors.
This brought to €5.9 billion the total amount returned to the exchequer, in one form or another, since the sector here collapsed in late 2008. Bank of Ireland had received €4.8 billion in hard cash from Irish taxpayers along with an open-ended guarantee of its liabilities.
“The preference share deal was very important,” Boucher says. “Symbolically important. When I came into the role [in February 2009] . . . my colleagues got sick of hearing me talk about the three Rs – reduce the risk, repay, and reward the risk.
“It was very important for us morally and psychologically, and it meant a lot to my colleagues in the branches to be able to look their customers, who are all taxpayers, in the eye and say taxpayers have made a profit [on the State’s investment].”
The State’s involvement in Bank of Ireland now rests with its near 14 per cent shareholding, currently valued at about €1.3 billion.
Last year also saw the Government pull the eligible liabilities guarantee, a move which will save Bank of Ireland hundreds of millions in fees. The bank also nudged its net interest margin (a key barometer of its trading health) closer to the desired 2 per cent level while substantially reducing its losses.
It cut a deal with staff on reducing the cost of its pension scheme and got the green light from the European Commission to retain ownership of its New Ireland Assurance subsidiary, a profitable, low-risk unit that Boucher had never wanted to sell.
On Monday, Barclays picked it as its top banking tip in Europe this year.
“It was a very positive year but we were blessed by momentum,” is how Boucher sums it up in his own low-key way.
It hasn’t all been honey and jam. About 5,500 staff have left the business since 2008 and its operating costs were reduced by about one quarter.
Boucher is the sole survivor among the senior executives who were in place at our main banks when the sector went splat. That makes him a lightning rod for public anger, none more so than when it emerged last year that his total remuneration in 2012 had risen by 1.4 per cent to €843,000.
It is no secret that he is better paid than his counterparts at AIB and Permanent TSB, which were also bailed out by taxpayers.
“Ultimately, my salary is decided by the shareholders who pay the salary and own the company,” he says tersely. “I justify it every year to the people who pay it. I stand up for re-election every year.”
Does he understand the public anger about this issue?
“ Of course I do. But there’s not really much more I can say about that.”
Boucher cites the Mercer report produced for the Government last year on remuneration at the banks bailed out by the State. It found that salaries at senior executive level were behind those paid by Irish quoted companies and their financial peers in Europe, largely because no bonuses are being paid.
Boucher’s appearance before the Oireachtas finance committee in September to discuss its treatment of Irish customers in mortgage arrears also made the headlines.
The Zambian-born executive gave a robust defence of its decision to charge interest on the warehoused portion of split mortgages, which put it out of step with its rivals. The bank subsequently reduced the rate following a request by the committee.
“We do listen,” he says. “Sometimes we don’t agree and if we don’t agree we say it and we’re honest about it. We hope we’re solution-oriented people within the confines of a commercial organisation. But this is someone else’s money. It’s not Richie Boucher’s money, its someone else’s money.”
He also has a little dig at his rivals, whom he suggests are more style over substance when it comes to mortgage arrears. “When we say we’re going to do something we actually do it. We need to see our rivals backing up what they say.”
Boucher says Bank of Ireland has done 620 split mortgages for owner occupiers, which he argues is more than his competition.
He is sanguine about mortgage arrears. Of the 11,700 customers who filled in a standard financial statement – a first step in a bank assessing the financial health of a customer – and had an issue with their mortgage repayments, it was able to offer a restructure of some sort or other in 89 per cent of cases.
Repossessions
"The other cases were deemed to be unsustainable," he adds.
What does that mean?
“We work with the customers to sell the property,” he explains. “We would always look to try and get some consensual type of sale.”
Boucher acknowledges that repossessions are a “big issue” but says they are “contained” in a Bank of Ireland context. He says the number of repossessions of owner-occupied properties by Bank of Ireland this year will probably be “in the hundreds”.
“Repossessions and requiring customers to sell properties is always part of a mortgage relationship. We’d have 300 to 400 repossessions a year in the UK. We see repossession as a last resort [but] it would be totally disingenuous to say we’re not [going to do any].”
Boucher adds that the total arrears in its Irish mortgage loan books stabilised in the third quarter of 2013, with the level of early arrears declining. It’s worth noting that Bank of Ireland’s mortgage arrears – those customers 90 days or more behind with their payments – was at 7.3 per cent last year compared with an industry average of 13.7 per cent. Relatively speaking, it’s in better shape than its rivals.
“The arrears are coming down,” Boucher adds.
He is also clear that there will not be any wholesale debt forgiveness. “We got investments. People expect their money back. The money has to come from somewhere. The taxpayers haven’t said they don’t want their money back from the banks.”
His view of the recent rise in property prices, particularly in Dublin?
“The property market is a function of the economy as a whole. We think the economy is improving. The recovery will be slow and a bit uneven. Property prices in Dublin are still 40 per cent off peak. That doesn’t to me look like a bubble.”
Bank of Ireland accounted for 35 to 40 per cent of mortgages written here last year. “We would hope to do something similar this year,” he says.
Restructuring
In total, Bank of Ireland is planning to do €33 billion in "new" lending out to the end of 2017, with 40 per cent of this in mortgages.
The restructuring plan agreed with the EU blocks Bank of Ireland from the broker channel, which is part of the reason why Boucher, unlike most of his rivals, has retained the bank’s extensive branch network. “Ultimately, a product has to be sold to a customer and we feel that having a presence in every major commercial centre is important. Some products will always be very difficult to sell over the internet. A mortgage, I think, is one of them.”
That said, he has reduced the number of products on offer, both as an efficiency measure and to simplify the offering. “We’ve a lot of products where we’ve just 20 or 30 customers,” he reveals.
Rising fees have been necessary, he insists. “If we’re investing in systems and products, we expect to get paid for them. There’s no such thing as free banking, you pay for it in some way or other. Giving away for free something that costs you money to produce is not a way that I can see taxpayers getting repaid.”
Dressed in a dark grey suit, white shirt and a speckled purple tie, Boucher displays a certain nervousness throughout the interview, with his right leg going like the clappers at various intervals.
By his own admission, he's not comfortable in the media spotlight. Yet he clearly is a strong performer in front of potential investors and when engaging with Government and staff. Wilbur Ross and Prem Watsa, both Bank of Ireland shareholders, have publicly praised his stewardship and supported his retention as CEO.
What’s the secret to his longevity, given that all his peers from pre-2008 are gone?
“Wilbur and Prem aren’t investing in Richie Boucher. If they were, they’d just give me the money and I’d go and run a hedge fund. These are pretty shrewd guys. You have to have something good to sell to them. I did. I believed the country would recover. I genuinely did. I believed in our bank. I really felt we could do it.”
Retirement
Boucher will be 56 in August but insists he has no thoughts of retirement.
“ The day you start thinking about it is the day you go. If I ever felt that I was getting bored in the job, which is unlikely, I’d do something else because then you are losing interest.”
Would he like to get the State off the share register before taking his leave of the bank?
“That’s totally a decision for them. It’s a commercial investment held by the NPRF [National Pension Reserve Fund]. It doesn’t influence our strategy, it’s not seen as a negative. As a big bank in a small country we would always have to have an appropriate relationship with the Government.”
Wouldn’t it be symbolic for Bank of Ireland in drawing a line under the crisis?
“Out of all of the things I feel we still have to achieve, that would be a very low priority,” he says.
“I can understand why people might think it but, being straight, when I sit down with my colleagues . . . it would be struggling to get on the list.”
When might we reach the promised land of “normalised lending”?
“Hopefully, we’re doing normalised lending now. We don’t actually make any money by saying ‘no’. We must carefully say ‘yes’. It’s important that we learn the lessons of the past but that we don’t become gun shy.”
Word up: Richie Boucher on . . .
The September 2008 bank guarantee
"Things were happening very, very quickly, There wasn't a huge debate about whether we would accept the guarantee. Once the guarantee was made available we couldn't not accept it. I think it was probably the only thing that could have happened at that time."
Whether Bank of Ireland could have survived without the cover of the guarantee
"I just don't know
The public's anger towards bankers
"It's not something that has me lying awake at night and worrying about it. Ultimately for me, my job is to run the bank. To set out the strategy to the board, the board then represents that strategy with me to the shareholders. The shareholders then decide on it and put their money where their mouth is. I get hate mail every day. [But] I was brought in mining towns in southern Africa; I went to boarding school from the age of seven and my sensitivity genes would have been beaten out of me early in life. You shouldn't take on these types of jobs . . . unless you have a certain sense of accepting that's part of the territory."
Minister for Finance Michael Noonan
"He's been very direct in his dealings with us. He's been pretty challenging. But he's always been looking not just at the immediate issue under review but also how will it play out in the longer term. "He's had a number of difficult cards [dealt to him]but he's played them very well. We haven't always agreed, but he wouldn't doing his job and I wouldn't be doing my job if we agreed on everything. We've agreed on 90 per cent of the issues facing the bank and the economy."
The upcoming banking inquiry. Will he co-operate?
"Of course. It's something that is felt is necessary by the Government and the people and therefore it is something that has to be done. None of us chooses the parts of our jobs that we like and don't like. We just have to deal with it. "
His management style
"You'd better ask my colleagues. I'm a strong personality, I know that and I have to watch that. What I've learnt over the past four years is to focus on not just telling people what has to happen but trying to get to the why and the how."
What he would like his legacy to be?
"I was part of a management team that made a lot of mistakes here and that is a big motivating factor for me as to repaying the State. It was very important to me personally that we dealt with that."
CV: Richie Boucher
Name: Richie Boucher
Job: Chief executive, Bank of Ireland
Age: 55
Lives: Clontarf, Dublin
Family: Married with two children, ages 21 and 18.
Hobbies: Sport generally. "I like reading and I like history."
Something we might expect: "I'm a rugby fan."
Something that might surprise: "I'm a big fan of soul music. Sixties and Seventies soul. My kids get driven mad because every time there's a new song comes on the radio I say: 'Ah, the original version was much better'. Ha, ha. That whole era from Martha Reeves and the Vandellas to the Emotions. It's funny because with my background, liking soul music, I was pretty standoutish as a white boy in southern Africa."
