ANALYSIS:THE DEPARTURE of Michael Fingleton as chief executive of Irish Nationwide on April 30th will mark the end of one of the most colourful and controversial careers in Irish financial life, writes SIMON CARSWELL
His retirement after 37 years running one of only two building societies remaining in the State has been signposted for some time. Many believed his position had become untenable after it emerged last month that he was paid a €1 million bonus last November – just weeks after the Government moved to guarantee the banking sector.
He also had a pay rise this year, bringing his salary to €1 million.
Fingleton initially refused to repay the bonus, arguing he was legally entitled to the payment which had been agreed last April. This drew huge political pressure. Further questions were raised when the Department of Finance started to examine his €27.6 million pension scheme.
Dan Boyle, the Green Party Senator and finance spokesman, went further, criticising Fingleton’s stewardship of Irish Nationwide, saying he had run the institution “like his own personal fiefdom”.
Fingleton succumbed to pressure last Friday agreeing to repay the €1 million bonus, but not before repeating four times in a statement that he was legally and contractually entitled to the money. The statement was quintessential Fingleton, fighting to the end, despite agreeing to return the €1 million bonus.
Controversy has never been far from Irish Nationwide and the man better known as “Fingers”, particularly over recent months.
Concerns grew last September after two international credit ratings agencies cut its rating amid fears over its exposure to the collapsing property and construction sectors.
Irish Nationwide has travelled far from its mutual roots, selling mortgages to help customers buy their own homes, during Fingleton’s long reign. Over the past five years, it morphed into a specialist lender to housebuilders, developers and property investors, even taking stakes in some of the ventures it bankrolled. Construction and property investment loans almost doubled to close to €10 billion in two years, from 2005 to 2007. It reaped the rewards of surging property values, making a profit of €391 million in 2007. Fingleton received €2.3 million that year, including a €1.4 million bonus.
But the society is now heavily exposed to the same sector that made it so profitable. Some 80 per cent of its €12 billion loans relate to construction and property, and Irish Nationwide is expected to be loss-making when it eventually publishes its results for 2008. This exposure worried rating agency Standard Poor’s, which cut its rating to one notch above “junk” status in February. This will force Irish Nationwide’s borrowing costs up as it prepares to raise €1 billion next month in funding for the business.
Fingleton has also attracted controversy over his role in the concealment of Seán FitzPatrick’s loans at Anglo Irish Bank. He has made no comment on the subject. FitzPatrick borrowed short-term loans from Nationwide’s head office in Dublin over eight years to conceal loans of up to €122 million at Anglo Irish.
Nationwide remains the only financial institution to be fined by the Financial Regulator after Fingleton’s son, Michael jnr, based in the society’s London office, circulated an e-mail touting for deposits last October using the Government deposit guarantee as a lure.
Fingleton will also be remembered for missing an opportunity to sell the business.
The Government changed legislation in 2006 paving the way for demutualisation and sale, but by the time Irish Nationwide began to woo suitors in 2007, the financial crisis had struck, scuppering a sale and windfalls for the society’s estimated 100,000 members and Fingleton.
A veteran of Irish banking, he will retire without one windfall, his €1 million bonus, but will still have a large pension fund to enjoy for his 37 years of service.
Simon Carswell is Financial Correspondent of
The Irish Times