Reflecting on the banking clean-up

BUSINESS INTERVIEW:The head of the company tasked with running down Bank of Scotland's disastrous sortie into Irish banking believes tidying up the mess will take longer than expected

JOE HIGGINS CALLS it “this adversity business”. It’s the drawn-out, tricky and often painful process of working out bank loan books, a large part of which have soured.

Certus rose out of the ashes of Bank of Scotland (Ireland), which the UK bank Lloyds didn’t want. The bank hired Higgins’ work-out company, which was set up in 2010 in response to Lloyds’s withdrawal from the Irish market, to work out €29 billion of loans.

The closure of BoSI meant that Higgins, a former chief operating officer and finance director of BoSI, was left with the nightmare task of telling half of the bank’s 1,600-strong workforce that they were being made redundant. The bank first announced the closure of the 44 Halifax retail branches in February 2010 with major job losses and the closure of the bank six months later.

“I made 800 people redundant. I never want to do that again. In terms of dealing with an organisation as we went through the uncertainty, the sense that colleagues have is that we are beyond what a number of the other banks still have to go through,” said Higgins.

Certus is different to the State’s two work-out vehicles, Irish Bank Resolution Corporation (the former Anglo Irish Bank that is also winding down Irish Nationwide) and the National Asset Management Agency, he said.

They will close and it is “just a matter of when they run out of road”, Higgins said, whereas Certus plans to be around for longer, working on the restructuring that other banks must go through: “We are out the other side of that. We feel relieved to a degree to be there, to have survived. It is something created out of the ashes.”

Higgins believes this will make Certus an attractive place to work as it doesn’t have a wind-down deadline and, as a result, is best placed to do this kind of work.

“As they . At no point did we breach the sectoral guidelines in relation to it. At all times we were fully compliant, unlike some of our competitors.”

HBOS, which had to be saved by the UK government in October 2008 and later by Lloyds, “turned out to be not quite as strong”.

Higgins later queried deals agreed by BoSI, asking, “what the hell happened here?” and acknowledging now that “things got away with themselves”, but he wasn’t involved in approving loans for some time.

“Would I have done it if I was here? I can’t honestly say that I wouldn’t have gotten caught up in the same thing if I was here.”

Even though HBOS was “never huge fans of tracker mortgages”, he says, they sold them in Ireland because, at the time, the bank made more on them than on its UK mortgages.

He points to BoSI’s establishment of a retail bank in Halifax in 2005 and the strong marketing campaigns that accompanied it as an attempt to broaden the bank’s business away from property and the “over-reliance” on funding from the parent, HBOS.

“It takes a long time to build a retail bank, okay – probably even longer, looking at it now; you recognise that now – the inertia in retail is immense, even with the very aggressive, focused approach to what we had ... to acquire customers,” he said.

His later experience sorting out mortgage problems at HBOS put him in a good position to work out BoSI loans on behalf of Lloyds.

“What I bring is effectively that turn-around – sorting out problems, facing into them, calling them as they are, whether they are palatable or unpalatable, and dealing with them,” said Higgins.

UK bankers were quoted in the Financial Times last week saying that Lloyds’ Irish loans were the “biggest challenge” for the lender and that the Irish crash was a “generational problem” that could take decades to resolve.

“It is very hard to predict how long it will take, but the odds are that it will take longer rather than shorter. It is only worth pushing it out longer if you are ultimately going to get a better result.”

Higgins says that what staff at BoSI went through in 2010 – with the closure of the bank and the formation of Certus out of that situation – was, in a way, similar to what the country must go through now.

“It is pushing it a bit but there are parallels for the country as a whole,” he said. “We faced into what were the difficulties, called time on something that hadn’t worked out, had to take the pain and the very difficult months that went with that.”

Friday Interview

Name:Joe Higgins

Position:Chief executive, Certus

Age:47

Family:Married to Siobhán, they have three children.

Home:Dunadry, Co Antrim – he has commuted for his working week for 13 years during stints working in Dublin and London.

Hobbies:Travel, golf and supporting Manchester United.

Career:Qualified as an accountant with PricewaterhouseCoopers before starting his career in banking at Bank of Ireland in Belfast. He moved to Bank of Scotland (Ireland) in Belfast in 1996 and was responsible for asset finance and commercial banking.

He was appointed to the board of Bank of Scotland (Ireland) in 2003 and launched its retail operations in 2005 before becoming the bank’s chief operating officer and finance director in 2006.

He was promoted to head of mortgages at the bank’s UK parent HBOS in London in 2007. He returned to Ireland in 2009 to succeed Mark Duffy as chief executive of Bank of Scotland (Ireland).

He established Certus with five other senior executives from the bank in 2010 after part-nationalised UK lender Lloyds Banking Group, which acquired HBOS in a rescue takeover in early 2009 after the 2008 financial crash, said it was exiting the Irish market.

The company won the contract to run down the Irish loan book. There are six shareholders in the company – Higgins, Gavin Lyng, Tom FitzGerald, Martin Akers, Mark Mohan and Siona Meghen.

Something you might expect:Coming from Northern Ireland, he is a big fan of Rory McIlroy.

Something that might surprise:Despite coming from Northern Ireland, he has "become a 'naturalised' Leinster rugby fan".