Efforts to repair economy and banks cited as reasons for investment

TWO INVESTORS in the group taking a 34.9 per cent stake in Bank of Ireland have said that they invested in the bank on the basis of the Government’s efforts to repair the economy and the banks.

Prem Watsa, founder of Canadian insurance giant Fairfax – the lead investor in the group – said the Government had taken “great strides” to repair the banks and he saw Bank of Ireland as an investment for “years, not months”.

“The Government has a clear vision for the country, they are in control of their budgets and have taken huge efforts to get control of the economic problems,” he said.

“We are very excited about the possibilities at Bank of Ireland.”

One of the reasons for his investment was the work undertaken by chief executive Richie Boucher.

“We would not have made this investment if it was not for Richie Boucher,” said Mr Watsa.

“He is hard-working and determined to make Bank of Ireland successful again.”

Despite heavy losses on property lending, he felt that the bank had “an excellent, disciplined credit culture”.

“When you have a property and construction tsunami, you cannot escape that – no bank will be spared,” he told The Irish Times.

“The country is going through a difficult time but we see it coming back again in time.”

Investor Wilbur Ross said that the bank was “generally regarded as the best of the Irish banks and we concur with that opinion”.

He said that he believed Ireland “will soon become the Celtic Tiger again” as it had a young, well-educated population, the lowest corporate tax rates in Europe and strong, favourable trade balances.

He praised the Government and the Irish population for accepting “extremely harsh austerity to overcome the extraordinary one-time banking crisis” in contrast with the “Club Med” countries.

“Ireland is demonstrating the kind of appropriate behaviour that other highly indebted countries should adopt, but like will not,” he said.

Fairfax was approached by businessman William McMorrow, chief executive of California property company, a couple of weeks ago about making an investment in Bank of Ireland, said Mr Watsa.

Mr Watsa then approached Mr Ross, Fidelity and Capital Research about joining Fairfax in making an investment in the bank.

“The market’s view of Ireland is wrong,” said Mr Watsa. “Markets are emotional and only focus on the short-term. They are too optimistic on the upside and too pessimistic on the downside.”