Bank of Ireland is “actively considering” a plan to offer to buy out thousands of legacy shareholders with tiny holdings after their stakes were severely diluted by its crisis-era bailouts, according to its chief executive.
It follows moves by AIB and PTSB last year to launch so-called odd-lot offers last year, which saw them buy back hundreds of thousands of shares from investors whose stakes were catastrophically watered down by taxpayer rescues about a decade-and-a-half ago.
“We are actively looking at a mechanism by which smaller shareholders can sell their shares. That’s a commitment we are making today,” said Myles O’Grady, the chief executive, responding to questions from shareholders at the bank’s annual general meeting (agm) in Dublin on Thursday about the prospects of such a process.
“We are aware of the issue, but, to be frank, we didn’t think it was as acute an issue as other banks.”
AIB, where taxpayers took a 99.8 per cent stake in exchange for a €20.8 billion bailout during the crisis, bought back 253,765 shares from individual investors with as many as 20 shares for a total consideration of €1.4 million. PTSB, in which the Government acquired a 99.2 per cent stake in 2011, spent just over €1 million repurchasing 592,943 shares.
The two schemes applied automatically to such shareholders, unless they actively opted out.
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The programmes were in response to calls from shareholders for such a mechanism, as they – or, in many cases, the estates of deceased legacy investors – could not realise any remaining value for their shares on the market on account of dealing costs.
They crystallise large capital losses for pre-crash investors, even if they could be used to offset tax on investment gains elsewhere.
Boomtime investors in Bank of Ireland were also severely diluted during the financial crisis as the State and a group of North American investors acquired over 15 per cent and almost 35 per cent stakes, respectively, in emergency cash calls.
Legacy investors that did not participate in rights-issue share sales to preexisting shareholders during the crisis saw their stakes diluted even further.
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Bank of Ireland has 2,500 shareholders with 25 or fewer shares. It has 80,000 investors in total.
The bank’s chairman of less than five months, Akshaya Bhargava, fielded a number of questions and complaints from former employees about bank’s defined benefit pension scheme, where retirement benefits are linked to final salaries. Dozens of former staffers also staged a protest outside the agm venue.
The scheme closed to new members over a decade ago, at a time when existing plan members suffered a hit to future benefits.
For the past dozen years pension increases have been essentially capped at 3 per cent – or 4 per cent, minus a 1 per cent clawback – while newly retired individuals get no rise for the first three years. The bank had promised in 2010 and 2013 to review the limits when its profitability stabilised.
Mr Bhargava said that the bank carried out “a very detailed review” of the matter, but concluded that now was not the right time to make changes.
He said that the bank and the fund’s trustees have an obligation to make sure the plan remains stable as it faces making payouts for the next 60 years to retirees. “But we will keep it under review,” he said.
Bank of Ireland reiterated its forecasts for 2025 in a trading statement earlier this month it had a “good start to the year”, with performance and profitability meeting its expectations.
The bank said that its core loan book grew during the quarter, with its mortgage book expanding by an annualised 3.5 per cent.
The bank said it continues to expect that its full year net interest income will come in greater than €3.25 billion, and that business income – including its New Ireland and Davy units and shares of joint ventures – is expected to rise 5 per cent. It reported €3.56 billion of net interest income last year in a higher interest rate environment.
