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EDITOR'S TAKE: Cold and conservative in Irish banks
17 July 2008
Sometimes your words can come back to haunt you. Four months ago, I was waxing lyrical about how the conservative nature of Irish banks would mean they’re likely to ride out the credit crunch. Now, however, the picture looks decidedly grim.
Bank of Ireland’s share price fell to the lowest level in 19 years after it said the deteriorating Irish economy was “adversely impacting” earnings. Allied Irish Bank, Anglo Irish Bank and Irish Life and Permanent also suffered. The institutions’ shares have slipped by 60-75% over the last year.
Sheltered from complex products related to sub-prime mortgages they may be, but they’re heavily exposed to the domestic property market, which has come to a “shuddering halt” – or so Irish finance minister Brian Lenihan said last month.
When it comes to the property slowdown, “The bad news hasn’t really started yet,” Eamon Hughes, analyst with Goodbody Stockbrokers, ominously predicted last week.
All this means that if the banks were conservative before, they’re going to be positively prudish from now on.
Richard Burrows, governor of Bank of Ireland, told shareholders at the AGM: “It’s time for hard hats, I’m afraid. It’s time to run this bank in a very conservative way.”
So far, there’s no sign that the Irish banks are about to cut jobs, and domestically they’re still considered a safer bet than international banks, which could close Irish operations if things get too tough.
However, if the Celtic Tiger propelled them into expansion mode over the past few years, it’s now a whimpering pussy cat afraid to come out of the corner.
Bank of Ireland has frozen recruitment across most divisions apart from wealth management, recruiters tell us, while Allied Irish Bank has taken the radical step of cancelling its graduate recruitment scheme.
If there are no job opportunities for the graduates there’s no point in training them up.
It might be the middle of summer, but it’s looking decidedly chilly.
