The lower bailout rate, IMF approval of recent progress, strong exports and a stable culture are all working together to distinguish Ireland from weaker EU economies, says US billionaire and new Bank of Ireland investor Wilbur Ross

POSITIVE NEWS from Ireland is prompting a growing number of investors to look at the troubled euro zone economy, said US billionaire Wilbur Ross, who this week invested €300 million in Bank of Ireland.

Mr Ross surprised many by joining Canadian firm Fairfax Financial and California’s Capital Group in a €1.1 billion investment in the bank, the first significant foreign investment in Ireland’s banking sector since it collapsed in 2008.

Mr Ross said the deal was fuelled by positive news from Ireland that indicates it is breaking away from its troubled peers in southern Europe and embarking on a solid recovery.

This includes the Government’s announcement it was ahead of target to bring its budget deficit under control, lack of protest against a harsh austerity programme, and the European Union’s decision this month to ease the terms of the €85 billion bailout.

“The macro picture of Ireland . . . is clearly headed in the right direction and will very likely have a more V-shaped recovery than most other European countries,” Mr Ross said.

“We have gotten a lot of inquiries from other investing institutions that know us, asking about Ireland and suggesting that they at least are now willing to take a much better look than they were prior to all of this.”

Irish sovereign debt prices staged an impressive rally this week in spite of growing bond market volatility elsewhere in the euro zone, in part due to the vote of confidence from the investment in Bank of Ireland.

Although Ireland is mid-way through an unprecedented eight-year cycle of austerity, social unrest is almost non-existent and, unlike Greece and Portugal, Ireland is expected to return to growth this year because of a vibrant export sector and the flexibility of its economy.

“I am genuinely impressed and have been for some time at the way Ireland bit the bullet and faced up to it,” Mr Ross said.

“Unlike the Club Med economies, the former government and the present one have dealt very surgically and very quickly with the problem.”

A key development was a euro zone deal that eases the terms of Ireland’s bailout and positive comments from the International Monetary Fund that Ireland’s programme is on track, assuring investors that Ireland had virtually guaranteed funding through to 2013.

“Since they are fully funded at sovereign level to 2013, there can’t be a government bond auction that could be undersubscribed and precipitate a problem,” Mr Ross said.

“There is no other country in Europe that can say they have that.”

The guaranteed funding limits Ireland’s exposure to a possible Greek default, which Mr Ross said he believed “would not have that much effect” on Ireland.

Solid growth in the broader economy is likely in the second half of next year, Mr Ross said, but he warned it would take longer for Bank of Ireland to turn a profit.

The lender’s consumer business may be dampened by high unemployment, an indicator that is likely to take longer to recover than headline gross domestic product growth.

“We don’t see the next few quarters as being profit – it would be very hard for that to be the case as there are probably some meaningful loan losses yet to take,” he said.

Mr Ross, who manages some $10 billion (€7 billion) in investments, is known for consolidating out-of-favour assets in areas such as cars, steel and coal and has recently invested in small, regional US banks.

He said he was attracted to Bank of Ireland by the high quality of its management, the fact that half of its assets are outside of Ireland, and the value of its insurance arm.

Under the deal, brokered by the Government, Mr Ross’s New York-based buyout firm WL Ross Co will take a 9.9 per cent stake in Bank of Ireland for €300 million.

He said he will not increase its stake as any additional investment would bring regulatory complications.

Mr Ross said the 10 cent per share he paid was far below his estimate of the bank’s book value of about 26 cent per share, giving a buffer against future losses.

The new investors, who together will hold 35 per cent of Bank of Ireland compared to the State’s stake of 15 per cent, have no plans to change the bank’s management, Mr Ross said: “Our intention to keep them in place.”

Mr Ross said he is open to other Irish investment opportunities, but would focus on Bank of Ireland.

He refused to rule out a bid for the life insurance arm of Irish Life but said it would be only possible if his company found an insurance firm to partner with.

“We believe in Ireland so we will look at other assets, but this will be a very big project,” he said. “This will be our primary focus.”