ANALYSIS:IRISH LIFE & Permanent (IL&P) finance director Peter Fitzpatrick likened the group's attempt to counter market rumours about its funding situation as "a bit like trying to fight terrorists - nine times out of 10 you don't actually see them".
Fitzpatrick and IL&P chief executive Denis Casey used the presentation of the group's 2007 results to go on the offensive in an effort to dispel any lingering doubts about the business.
Despite the impact of the subprime crisis on the world financial landscape being "unparalleled in recent memory", the insurance and banking group is forecasting small profit growth in 2008.
Fitzpatrick dismissed market speculation that the group would have to tap the investment market for more money in a rights issue to improve its capital position. IL&P had been more open than most financial companies when it warned in its December trading statement that 2008 earnings may drop or be only slightly higher due to the higher cost of funding in the international markets where it sources its money. The share price was hammered that time.
IL&P was more optimistic yesterday, saying operating profit may be at the high end of its forecast as conditions ease in international money markets.It said profit may rise "marginally" in 2008.
However the market wasn't too impressed, particularly after details of IL&P's funding prospects were outlined to analysts in a conference call. IL&P's share price fell 6.2 per cent at one point before closing down 3 per cent at €10.90, eroding some of its 8.7 per cent gain on Tuesday.
Across the Liffey, in his headquarters on St Stephen's Green, Mark Duffy, chief executive of Bank of Scotland (Ireland), said he was revealing its first full-year results as "a fully servicing bank" now that it has opened most of its planned 46 Halifax branches.
Duffy explained that he didn't have the headaches afflicting many of his peers. B of Scotland had come to the market late and "missed the party". It had no major exposure on loans to builders or concerns about the falling value of homes securing 100 per cent mortgages, a market it had avoided.
IL&P doesn't lend to developers either, so Casey has one less headache than many. He could have been speaking for most Irish bank chiefs when he expressed his frustration at the naysaying about Irish banks that was sparked by concerns about funding and the property slump.
"There has been a fair bit of mischief-making around the Irish market in 2007. . .It is frustrating for businesses when you have a constituency that are determined to talk down the business and to spread unfounded rumours." Judging by IL&P's share performance, investors are not fully satisfied with its funding situation.
IL&P relies more than AIB, Bank of Ireland or Anglo Irish Bank on the wholesale markets, where two-thirds of its funding is sourced. Fitzpatrick said IL&P was "A-okay" on long-term funding until the third quarter of 2008, when it would need €3 billion.
IL&P also has a smaller banking operation than its Irish rivals. This means that, if the long-term funding costs remain high, it will have to dig deep or fund itself long-term with short-term money which would carry some structural risk. AIB and Bank of Ireland, being bigger, can afford to wait.
Sebastian Orsi, analyst at Merrion Capital, is forecasting negative earning growth for IL&P in 2008 due to the heavier cost of funding and a tougher sales environment for its life business.
IL&P recorded a strong set of results for 2007, particularly in its life business. Its banking profits still grew 8 per cent despite a difficult year. But investors are looking forwards, not backwards, and the future will be more challenging.
As Casey said yesterday: "Eaten bread is probably forgotten."
