It has been a fascinating week for anybody with an interest in banks and, in particular, for anybody with an overdraft. Allied Irish Banks has had a rollercoaster few days. First it announces a surge in profits by 42 per cent to £826 million. Obviously it did very well on the back of the Celtic Tiger but it also did well in Britain, which is in recession, and in Poland which would almost count itself lucky if it was only in recession.
Clearly, the employees of AIB have got banking down to a fine art. It is an enormously successful company with assets worth nearly £30 billion. And in this era of European bank-merger mania, it would seem that every self-respecting huge bank is on the prowl for other huge banks so as to combine into banking monoliths.
The suitors for AIB were Lloyds TSB and Deutsche and it was a great rumour while it lasted, sending AIB shares into the stratosphere and AIB shareholders into rapture. Unfortunately, it was only rumour. This was smoke that did not emanate from a fire but baseless rumours are the lifeblood of all stockmarkets. AIB shares have since tumbled. They were €17.20 two weeks ago, yesterday they were €15.15. On Wednesday, when the bumper profits were announced, the shares fell by one euro. It has, no doubt, been a week of mixed feelings for AIB shareholders.
That an AIB merger or takeover is not about to happen, is good news. When corporations merge or acquire one another, there is much talk of enhancing shareholder value which makes the shareholders very happy. But enhancing shareholder value is doublespeak for taking a hatchet to the employees. AIB employs 23,000 people, most of them in Ireland. Europe is too small and the big banks are too large for AIB to get together with a bank with which there would not be a large overlap of operations. A merger would cut employee numbers drastically. It will forever be in the interests of the Irish economy, if the Irish banks can fend off would-be purchasers. The way to do that is to be successful. This drives up the share price (which makes a purchase less attractive) and, in this, AIB has been demonstrably successful.
Where AIB has not been successful is in treating its customers as equals. If you are a small trader whose business is in trouble and you cannot repay your working capital loan, the chances are that AIB will pursue you through every court in the land until you haven't got a five pound note to call your own. On the other hand, if you are a powerful politician like Mr Charles Haughey who thinks nothing of bullying, intimidating and threatening the biggest bank in the State, AIB blithely gives him a present of nearly £400,000 - even though he is indisputably a millionaire many times over. The next banker who says that all his or her customers are treated equally had better say it softly.
At least Dr Garret FitzGerald was treated like the rest of us. AIB took everything he had, even his house, and then let him off £200,000. This week, the Government announced that the TSB merger with ACC is to go ahead. Even when combined, it will be a minnow compared to the big boys and it will not pose any Third Force opposition. However, if instead of being a Third Force, it can be a force for better and fairer banking then it cannot be started too soon.