SECOND OPINION:BANK OF Ireland chief Richie Boucher was never comfortable with the bank being Ireland's "least worst bank" – but in a banking crisis this severe this was seen as a positive among the many negatives.

The bank’s 2011 results on Monday were the first opportunity to see whether this “least worst” Irish bank could offer hope of a return to the State, a 15 per cent shareholder, and to the investors who have followed the contrarian North American investors who bought 35 per cent last summer.

In the three years since Brian Lenihan said he would inject €3.5 billion each into Bank of Ireland and AIB, the State’s payouts have reached €4.2 billion at the former – but soared to €20 billion at AIB. This is perhaps the best measure of the differing levels of badness of the country’s two biggest banks.

Bank of Ireland is the best bellwether for the economy’s recovery. The business is heavily concentrated in the Irish market and is the only Irish bank left on the main stock exchange. An investment in the bank, given the price of its shares, is effectively an option on Ireland returning to growth.

So, are there reasons to be cheerful after these results? First, the positives – deposits are returning, costs are down, bad debts are not as bad as in 2009, and losses are not as awful as in 2010. The bank has dumped most of its unwanted loans at better-than-expected prices and has weaned itself off emergency Central Bank loans. As for the negatives, bad debts rose in 2011, arrears and losses on home loans, buy-to-let mortgages and commercial properties are rising, and no one really knows whether proposed changes to personal insolvency legislation will lead to heavier write-offs of mortgage debts.

Also, Boucher faces the Central Bank’s fitness and probity tests on his pre-crisis mistakes as the bank’s head of Irish lending, for which he has tried to make amends.

The most telling sign that this bank is far from fixed is the fact it is paying through the nose for its money. It will be doing well to hit the profitability target it has set itself.

The cost of the Government’s bank guarantee – €449 million in 2011, despite a €25 billion drop in the amount of debt being guaranteed – is the heaviest weight it bears. The damage to profitability is offsetting any benefit from support the guarantee provides. The bank can pitch better rates to corporate depositors by not offering a guarantee from its biggest minority shareholder.

Boucher will wish he could fully emerge from under the Government’s wing soon, but timing that solo flight will be crucial. Jumping too soon carries huge risks, given the unpredictable headwinds. Life without State support – and the better title of Ireland’s best bank – is still some distance away. Judging from the recent share performance, more and more investors are betting it will fly.

Finding savings can just be called doing your job

THE NATIONAL Treasury Management Agency’s banking team were not exactly thrilled when they were to be moved last year to the Department of Finance from the Treasury Building. There, agency staff enjoy individual pay deals free from the constraints of public service structures.

Since then, the banking team has reduced in size to eight after the departure of legal adviser Keith Robinson and of analyst Enda Johnson, the team’s point man for AIB. Over at the agency’s offshoot, the National Asset Management Agency, former Goldman Sachs banker Graham Emmett left as head of lending last month. All this suggests growing unease among public sector workers over private sector pay rates at the former agency. It coincides with Minister for Public Expenditure and Reform Brendan Howlin’s ongoing attempts to apply the €200,000 public sector pay cap at the agency, which has voluntarily cut performance-related pay.

There is nothing wrong with rewarding skilled staff when those rewards are measured on reducing costs or maximising gains for the State. But it could just as easily be argued that a professional in the health service finding innovative savings is entitled to the same rewards when they are just doing their jobs.

The agency was set up on private sector benchmarks in 1990 and this “L’Oréal” culture (“because we’re worth it”) persists. Breaking it will be tough. Pay of €200,000 should be enough to attract specialists to do the State some service at this critical time.