FRIDAY INTERVIEW:Andrew Hastings, CEO, Barclays Bank Ireland
ANDREW HASTINGS is a rare specimen in corporate Ireland. He is a bank chief with more deposits than loans, few bad debts to cure, eyeing new lending deals and will be hiring senior bankers over the course of this year.
Barclays Bank Ireland, a subsidiary of the British bank, is the second foreign bank posting for Hastings in Ireland. He moved to Dublin on the eve of the economic crash in 2007 to run the Irish operations of French bank BNP Paribas.
At Barclays, Hastings runs a corporate banking and wealth management business. The bank deals with large companies – those with turnover of €50 million and above. Clients include the big Irish food companies Kerry Group, Greencore and Glanbia.
The wealth management business, which is headed by Pat McCormack, has been built up over the past four years and handles “ultra high net-worth” clients, who have at least €10 million of “investable wealth”, said Hastings.
The Dublin office of Barclays also manages the bank’s operations in Northern Ireland where it deals with companies with a turnover of £15 million (€18 million) and over, and wealth management customers with £1 million (€1.2 million) to invest.
The Irish bank has loans of about €2.5 billion to €3 billion. It’s small compared with the domestic banks, but Hastings says business grew by between 14 and 15 per cent last year.
The bank was part of a consortium of lenders, including AIB and Rabobank, which refinanced a loan for the Irish Dairy Board with a new facility of €350 million.
“We have seen both the number of clients that we deal with and what we do with each client increase,” he said, sitting in a boardroom at the bank’s Irish head office on Hatch Street.
Barclays employs 100 staff – 80 in Dublin and 20 in Belfast. He plans to hire between 10 and 15 staff for senior posts this year and is seeking “reasonably seasoned bankers” for the roles.
Barclays weathered the financial crisis better than its UK rivals, avoiding a government bailout by securing Middle Eastern investor cash early in the crisis. This meant it could concentrate on new business and not on cleaning up bad debts.
“They didn’t get bogged down in redirecting effort on doing work-out on files that had gone wrong,” said Hastings.
“The bank’s experience in Ireland is benign. It didn’t have a load of bad debts and certainly on the property side it didn’t get badly burned – just the odd one. Given what went on out there, it was considered a very good experience.”
Barclays’ track record in Ireland serves as a salutary lesson to the domestic banks and some of its foreign peers in the Irish market. In 2004 the bank set out to build a property loan book but two years later realised that it was “a waste of time”, said Hastings.
“All the local banks were competing very fiercely and the only way you could build market share was either to compete on price or with a weaker term sheet,” he said.
From the peak of the market in 2006, as clients asked the bank to “releverage” loans to cash in on the benefit of a 20 per cent uplift in property values, the bank refused to refinance them.
The business instead went to Anglo Irish Bank, AIB, Bank of Ireland or Bank of Scotland (Ireland). Barclays dodged the bullets.
“The bank refinanced it all away. By 2008, the exposure to property was less than €100 million. It was negligible in the grand scheme of things,” said Hastings. “It was foresight on the part of senior management. The people on the ground and the people in London decided that it was probably a bubble and there was no point in us fuelling it. We couldn’t do it profitably so they pulled right back.”
Being in charge of a foreign bank in Ireland at a time of panic among depositors at the peak of the crisis in 2008 and 2009 gave Hastings an interesting perspective on the behaviour of cash-rich customers at the domestic banks.
Around the time of the Government guarantee in September 2008, Hastings fielded calls at BNP from worried depositors.
“I remember people were phoning me up, saying, ‘do you take deposits?’ We would say, ‘we take corporate and institutional deposits, yes, but we don’t take personal deposits’. They said, ‘that’s a shame – it’s €15 million, it’s €10 million – I just need to find somewhere to put it’,” he said.
BNP had a wealth management licence so it started taking deposits in response. Customers became so nervous in early 2009 amid growing concerns about the Irish banks that they gave BNP deposits without seeking interest.
“People just wanted the money back in the morning. They just wanted to know it was safe. There was no interest being paid on some of those deposits. That is how extreme it was,” he said.
Now, at Barclays, Hastings has a surplus of customer funding with a loans-to-deposits ratio that would leave bankers at the heavily-borrowed Irish banks salivating. The ratio can move around, he said, as deposit terms expire but in percentage terms it is in the 70s compared with about 170 per cent at the Irish banks.
Barclays uses the lure of its A- credit rating, which is higher than the Irish banks, to attract deposits. Hastings doesn’t like losing customers to the Irish banks which are paying a higher amount for deposits but the bank is not willing to pay up to compete for deposits.
In some cases, customers are unwilling to bank with the domestic institutions because of the havoc they wreaked, he said.
“Some people feel let down about what happened in the banks and feel they ought not to place their business there and support them because they got it so wrong and they feel, why should they do business with them?” he said.
The surplus of deposits over loans at Barclays means Irish deposits can be sent back to London to fund the parent bank.
“Clearly, what we would rather do is find opportunities locally to lend the money profitably and safely, and that is really a big emphasis on the business. It is to grow that loan book,” he said.
Hastings sees opportunities in property but some proposals being considered by the bank’s property team, led by Henry Cleary, are “obviously not doable”, he said.
Barclays is only willing to lend up to 70 per cent of a property’s value and at a price of about 2.5 to three percentage points above the cost of funds.
“We are beginning to see some assets being sold out of Nama. They obviously focus on the UK and overseas first but some of their Irish assets are being put up for sale. People seem to be prepared to negotiate a deal,” he said.
As chief executive of a British bank in Ireland, Hastings warns that the proposed EU financial transaction tax, rejected by the UK, could force some big Irish companies to move all their banking arrangements to London.
“The politicians have to be very careful with this. It has the potential to skew business to a centre that doesn’t impose it,” he said. “Money is one of the most mobile resources – you can press a button and move money anywhere in the system.”
As for the €500,000 pay cap at the guaranteed Irish banks, Hastings said this should be sufficient, given how these institutions have been reduced in size to pretty simple retail businesses.
“Given that they have shrunk right back and it should be just about running a relatively straightforward retail bank in Ireland, at that price you will still find who you want to do that and are good enough to do that,” said Hastings.
He sees the likes of Barclays and other international banks in Ireland, such as HSBC and Rabobank, as being part of the Government’s strategy to repair Irish banking.
The broken domestic banks are being downsized to concentrate largely on retail and small business customers, while the international banks focus on servicing the needs of the large corporates.
The Irish bank bailouts were aimed at “maintaining the banking system further down”, he said. “The perception – if you speak to the Central Bank or the Department of Finance – is that there is a sense that we are part of the solution.”
He believes the opportunity to force losses at the zombie Irish banks – Anglo Irish Bank and Irish Nationwide Building Society – on to their senior unguaranteed bondholders has long since passed.
“The moment at which the State could have got away with not repaying bondholders in full was about two years back,” he said. “The problem you have got now is that, having set a precedent of making full repayment, it looks like you have chosen to do it and that is far worse than not being able to do it.”
The last thing the Government should do is damage bondholder sentiment in Ireland when it will be asking them for new loans as it re-enters the markets, he said.
“You can afford to default on a debt provider if you don’t believe that you are ever going to have to go back to them,” he said. “But when you know you are going to have to go back to them – we are running a structural deficit and will be for years – the State is going to have to go back and borrow money in the international markets. You therefore don’t switch these people off on you.”
Hastings sees opportunities for Barclays to expand its business in Ireland in the deleveraging of the domestic banks which are being forced to dispose of “perfectly healthy businesses”, he said.
The bank is also headhunting executives, including the former Tipperary hurling manager Nicky English from AIB and Martin Cass from NCB to its wealth management business, as it concentrates first on growing organically.
“We are one of the few banks that is genuinely open for business,” said Hastings.
ON THE RECORD
Name: Andrew Hastings.
Position:Chief executive, Barclays Bank Ireland.
Age:47.
Home:north Co Dublin.
Family:married with two sons and a daughter.
Hobbies: jogging – he runs up to half-marathon distance but is planning to participate in this year's Caledonian Challenge, a 24-hour run across 54 miles of the Scottish Highlands.
Education: business degree from the University of Dundee.
Career: worked at Royal Bank of Scotland from 1985 to 1996 and for French bank BNP Paribas in London from 1996 until 2011. He was head of BNP's Irish operations from 2007. He took charge at Barclays Bank Ireland in July 2011.
Something you might expect:a Scot by the name of Hastings, he enjoys rugby.
Something that might surprise: he loves classic cars and owns a 1973 Jaguar E-Type Roadster with a petrol-guzzling 5.3-litre engine.
