Bank Of Ireland Buys US Asset Manager

by Jason Gorringe, Tax-News.com, London

17 May 2002

Bank of Ireland, Ireland's largest bank, yesterday reported a 9% increase in pre-tax profits from €992m to €1.08bn for the year to March 31 2002, after reduced exceptional charges of €37m against €9m, related to staff cuts and branch closures. The dividend is raised 9% to 21.4 cents, lifting the full-year pay-out 14% to 33 cents, paid out of earnings per share of 89 cents.

The Bank's effective tax rate fell from 19.9 to 17.4%, in line with reductions in Irish corporation tax. The bank is predicting an effective rate in the current fiscal year of 15-16% - a testament to the real benefits for Irish-based companies of the 12.5% corporation tax rate which applies to all companies from 2003.

At the same time, the bank announced the acquisition of a majority stake in the Connecticut-based Iridian Asset Management group. The bank, through its Bank of Ireland Asset Management (BIAM) subsidiary, has paid an initial $177 million (€196 million) for 61% of Iridian. It has agreed to a further payment of €24 million, based on the performance of the business over the next couple of years. Last year the bank's asset management division, which accounts for 11% of total profits, saw profits fall 5% from €133m to €126m, reflecting more difficult equity markets.

Evidently the Bank of Ireland has finished licking its wounds from its involvement with the First New Hampshire Bank, which the bank purchased in 1988 for $37 million: the acquisition floundered and generated massive losses.

Bank of Ireland refused to disclose Iridian's profitability, but it would have been expected to pay a substantial premium in line with other acquisitions in this sector. Based on the price paid, Iridian is currently valued at €361 million. BIAM said it had been searching for opportunities to expand its presence in the US fund management market for almost six years.

Iridian was founded in 1996 and currently manages assets worth €12.1 billion for its US clients which are mainly in the foundation, endowment and corporate sectors. Said BIAM chief executive, Mr Willie Cotter: "Iridian is a respected player in the US institutional market and enjoys a strong long-term track record. Their clients have been well-served by their investment philosophy and commitment to client service and this will not change.

Recommended