Mike Aynsley, chief executive of the Irish Bank Resolution Corporation, admits he is overly sensitive to the name Anglo, insisting that the bank has been ‘re-engineered’ and is entirely different to what went before
DON’T CALL Irish Bank Resolution Corporation “Anglo Irish Bank”. Mike Aynsley doesn’t like it. He is chief executive of Irish Bank Resolution Corporation, and Ireland’s most toxic bank hasn’t been “Anglo” since it was renamed last year.
There was a joke that a swear box was positioned in the bank’s head office on Burlington Road in Dublin 4 last year. Any time any senior member of staff mentioned the ‘A’ word, they had to dig in their pockets.
Aynsley admits he is “overly sensitive” to people continuing to call the bank Anglo when the old management team has been replaced by a new group of mostly foreign bankers, and the company has been “re-engineered” from a lender to a loan recovery business.
The new team has “spent an enormous amount of time purging those sins of the past”, he says. Aynsley hopes the bank’s approach to recovering as much money as possible for the Irish taxpayer – for example, the money due from Seán Quinn and his family – will prove to people the bank is very different now.
“Everything that the bank was, and the focus that the bank had, has been fundamentally changed. Yet because of the ill-feeling about what Anglo has done to the country, people find it very difficult to understand that what we do is fundamentally different,” he says.
“People can hate an organisation, but why should they hate a bunch of people who have come in from the outside, who weren’t part of the problem?”
While the Anglo sign may be gone from above his door, Aynsley will be dealing with the bank’s legacy for some time to come, while the State will be bearing the €29.3 billion cost for even longer.
Aynsley’s job appears simple on paper. Wind down the organisation over time and get back as much of the loans as possible.
Two years ago he said the final cost of Anglo – leaving aside Irish Nationwide Building Society, which IBRC is also winding down and which is costing the State €5.4 billion – will be between €25 billion and €28 billion. He is sticking with that estimate.
Speaking ahead of his third anniversary as chief executive of the State-owned bank today, he says it can be closed before 2020, the targeted date set by the Government, but declined to say when exactly.
Aynsley has run a bank that posted the biggest losses in corporate history. Since taking over, the cost of the bank to the State has risen from €4 billion to €29.3 billion, while it has made accumulated losses of €28 billion since he joined in September 2009.
The losses are staggering, but have arisen as a result of a property lender operating in a market where values have fallen between 65 per cent and 68 per cent.
“This is a market dislocation of mammoth proportions that you might see only once every 100 years,” says Aynsley.
He arrived in Dublin three years ago thinking he was hired to save a bank, not wind one down. Several attempts to proceed with his good bank-bad bank plan to rebuild a viable business lender out of the ashes of Anglo Irish Bank failed as the European Commission blocked it.
“They were quite open about the fact that their view was that any bank that has destroyed that much value doesn’t deserve to be allowed to survive, and it is to be punished,” says Aynsley.
Looking back, nobody foresaw the scale of the problems, he says, nor how to react to those problems.
“I don’t think anyone in government or out of government had really any idea at that stage of just how bad the situation was and how deep this spiral would go,” he says.
Charged with shutting the bank down, the Australian has since reduced the size of the business. The number of staff has dropped from 2,800 to about 1,000, while the number of offices the bank operates from has fallen from 19 to nine since 2009.
The size of the nationalised bank’s balance sheet has almost halved – from €100 billion to €53 billion – though much of this value comprises the remaining €27 billion of State promissory notes sitting on its books which were used to fund the bailout.
Loans have fallen from a peak of €73 billion to a face value of €27 billion or €16 billion, taking into account the provisions booked by the bank to cover bad debts.
The bank offloaded €34 billion of loans to another State-owned entity, the National Asset Management Agency, while the €7 billion US loan book was sold and €1.9 billion of loans in the UK were either repaid or disposed of last year.
The former Anglo deposit books were moved to Allied Irish Banks.
So the bank is a shadow of its boom-time self. But a workforce of 1,000 people still seems like an awful lot for a zombie bank?
Aynsley says about 250 staff work in the bank’s Nama unit, and the remaining loans on its books are complex and require skilled staff. Reducing numbers more quickly could damage the bank’s capacity to recover loans, he says.
Aynsley says the bank is “into the hard yards now”, a process of winding down the rest of the business loan by loan; in the absence of a solution to the euro debt crisis, there will not be another sale of a big loan portfolio.
For that reason, closing the bank more quickly than planned will add to the State’s bill, he says.
“We have always said that that can happen, but there is a price in doing it,” he says. “You kill it off quickly, it destroys capital. It is basic market dynamics – if there are no buyers in the market, you can only bring buyers in by reducing prices to a level in which buyers are interested. That means a hit on capital.”
Aynsley feels that as the Government now has an asset recovery vehicle in IBRC, it should be used to purge more bad or loss-making loans from the other banks, allowing those lenders “to present a cleaner face to the market” to hasten their recovery.
However, he feels such an idea is being discounted because of the public desire to obliterate what was formerly Anglo Irish Bank from the Irish banking landscape.
“There is a very good expression that is used in multiple situations – don’t throw the baby out with the bathwater. People are distraught because of what has happened. The easiest thing is just to kill it off,” says Aynsley.
Aynsley believes unprofitable tracker rate mortgages are best left with the other banks deemed by the Government to have a future. While they are a drag on profits, Aynsley believes the banks should retain these customers as they are “still good relationships”.
“The tracker mortgage as a product would be classified as non-core, but the banks would classify the customers as core,” he says.
Aynsley believes there is another model to be looked at to deal with tracker mortgages, which total about €52 billion at Bank of Ireland, AIB and Permanent TSB. “They can either be ring-fenced within those organisations or they could set up a structure that makes sense [in which] to ring-fence them and keep them with the client relationship,” he says.
IBRC could alternatively be used to take over commercial loan books from the “non-core” divisions of the other Irish banks.
Where loss-making loans at the other banks may end up will form part of the next restructuring of the banking sector in the autumn.
As for its own business, IBRC’s most high-profile work at present is recovering the €2.88 billion of debt racked up by businessman Seán Quinn, mostly to cover losses on his gamble on Anglo’s shares in the crash of 2008. That collapse, along with the public scandal over Seán FitzPatrick’s hidden loans, collapsed the bank in January 2009.
Aynsley says that, contrary to Quinn’s view that Anglo wrecked his business, the evidence emerging in the courts about Quinn Group and Quinn Insurance shows that “it was not always as it was cracked up to be in the Quinn camp”.
“The additional weight of the gambling losses that Seán Quinn himself levied on the Quinn Group . . . really was what pushed the business to the brink,” he says.
“You can’t take any business which is a good business and then independently go off and produce huge gambling losses and expect that good business to pay off all of the gambling losses. It doesn’t work that way – you will stress the business to the point where it won’t survive.”
Again, contrary to the views expressed by the Quinns, Aynsley says the bank has “not been able to get to the point where we can see a constructive and consensual way of working together for the benefit of the Irish taxpayer”.
He accuses the family of being “somewhat economical with the truth” when they claim the bank is unwilling to co-operate with them, but he declines to elaborate.
With one of the Quinns in jail for contempt of court, Aynsley says the bank will continue fighting legal actions to recover as much of the €2.88 billion in debt as it can, although IBRC’s provisioning levels show it expects to write off more than €2.3 billion.
“We will go as far as we need to to get the money back. I keep on saying this – this is nothing about being vindictive, this is doing the job that we need to do,” he says.
Aynsley declines to comment on how the bank will fight the family’s legal claim – that they do not in fact owe €2.34 billion of the debt because the loans were unlawfully advanced to prop up the bank’s own share price – if three former executives, including FitzPatrick, are found to have illegally loaned out money to buy shares in criminal prosecutions being taken by the State.
He says some of the bank’s own civil actions against former executives may no longer be worth pursuing from a commercial point of view given the cost involved, but fighting cases against former directors was a matter for the Minister for Finance, the bank’s owner.
“Ethically, I think it is very important that we continue with it. You reach a commercial point with some of these actions where, commercially, you should walk away. That is not our call then. That is the public interest call that the Minister will make – whether he wants to spend more money and litigate to make a point,” says Aynsley.
Another difficult area where IBRC is the subject of scrutiny is in its relationship with big borrowers such as Paddy McKillen and Denis O’Brien, and their travails outside the bank with business rivals (in McKillen’s case) and a tribunal of inquiry or potential bidders for businesses (in O’Brien’s).
Text messages sent by Aynsley to McKillen emerged in the case taken by the Belfast-born businessman in his legal battle with the Barclay brothers over the Maybourne luxury hotels in London.
The bank refused to sell part of McKillen’s debt secured on his shares in the hotels to the brothers for 100 cent in the euro, as it might jeopardise its ability to recover the full value of more than €1 billion worth of debt from the businessman and related companies.
Aynsley says the Barclays side have tried to blow the text messages out of proportion in an attempt to manipulate the bank into selling the loans to them to help them get control of the hotels.
The texts, in which Aynsley told McKillen the bank would be supporting him and not selling his loans to the Barclays, were appropriate, he says, “because he [McKillen] doesn’t email” and the bank needed to inform him quickly that the bank would work with him.
“The Barclay brothers have an agenda. Their agenda is to get the hotels. If they can play the divide-and-rule game, they will. They will try and compromise us and put us in a position where they pick up his loans cheap.
“Who benefits? The Barclay brothers’ net worth statement, not the shareholder of the bank,” he says.
IBRC was also drawn into controversy over the sale of Siteserv, the construction services business, to a Denis O’Brien company for €45.5 million in a deal criticised by a potential bidder who claimed they would have paid more.
Aynsley says he told Minister for Finance Michael Noonan that, for all the people who are successful in buying assets from the State-owned bank, there is a bigger list of people who lost out.
“They are not always happy they have lost and they will question the process with a view of opening it up again, so that they can get in and put something else on the table,” he says.
Aynsley declines to say how McKillen and O’Brien, two of the bank’s biggest borrowers, are meeting a repayment schedule to reduce their debts to the bank.
He defends the bank for having a close relationship with them both.
“We want to work with them on a consensual basis to have these facilities paid down so that we can eventually close the bank. It is a simple process, so it is natural that we have this,” he says.
He believes criticism of the bank arises from battles the two businessmen are involved in that have little to do with it. “You pick McKillen, who is in a fight with the Barclay brothers. O’Brien, who is having fights with [the] O’Reilly [family], who has been involved in the Moriarty tribunal. I don’t know who they are – I am not Irish, and I wasn’t involved during that period and I haven’t gone back and researched it all,” says Aynsley.
“But there are a lot of people behind the doors that have knives in their hands and are just waiting for Denis to walk past so that they can throw one in his back. When they hear that Denis is buying something from the bank and he has bid through an open process, they make assertions that ‘Gee, something must be wrong – the relationship is really close’. It is like throwing a knife in his back and it is one in ours as well.”
Another target for critics is Aynsley’s pay at IBRC. His total pay has fallen from €974,000 in 2010 to €866,000 last year. The package will fall again to about €660,000, this year as relocation and related expense allowances associated with his move from Australia end.
Despite the reduction, it still makes him Ireland’s highest paid public servant, given that IBRC is owned by the State.
There is ongoing pressure on him to reduce his pay, he says, and he understands it, but believes IBRC is doing a good job recovering money for the State and that management “deserve to be remunerated for it”.
IBRC can’t offer incentives to staff or a long-term career, as the bank is in wind-down, he says.
“On a comparative basis to public authorities, we are highly paid, but we don’t do a normal public authority job. We run a bank and we run recovery activities as bankers. I think on a comparative basis across the industry, we are probably not much above the lower rung,” he says.
Aynsley and his staff are, like the officials in Nama, in the unusual position where the better they do their job, the quicker they will be out of a job. After three years at the bank, will he stay for another three? Aynsley says he will stay for as long as he can help recover money for the State.
“I will be here as long as I can add value and as long as the State feels that they are getting value out of me. Right now, I find the job stimulating. There is still a lot to do,” he says.
He accepts it can be stressful, and that he faces the added public and political pressures that come with cleaning up the mess left behind by Ireland’s worst bank.
This has led to IBRC hiring security men to tail Aynsley and another senior executive as the bank deals with highly fraught cases involving financially distressed customers. He is nonplussed by this, even if it is a first in his 34-year career in banking.
“That is unusual for a banker, but you just do it,” he says.
FRIDAY INTERVIEW
Name: Mike Aynsley
Age: 54
Position: Chief Executive, Irish Bank Resolution Corporation, which was formerly Anglo Irish Bank
Family: Married to Belinda, they have three sons and a daughter
Homes: Dublin and Sydney
Hobbies: Hiking, fine wines
Education: He has an MBA degree from the Macquerie University Graduate School of Management in Sydney, Australia
Career: He started in banking at the commonwealth Bank of Australia in 1978 before joining Banque Nationale de Paris and later Amsterdam Rotterdam Bank. He moved to Security Pacific National Bank in 1992 and National Australia Bank in 1999, where he was general manager of the global markets division in global wholesale financial services.
After five years working as a partner in banking and financial services at accountants Deloitte, he joined Australian and New Zealand Banking Group in 2005, where he was chief risk officer of ANZ Bank NZ and National Bank of NZ and later a senior executive with the bank, based in Sydney. He worked for three years as a consultant before joining Anglo Irish Bank on September 7th, 2009
Something you might expect: He has spent 10 years working outside Australia with stints in the UK, Japan, New Zealand and Ireland.
Something that might surprise: His grandfather was a regional manager with what is now the Commonwealth Bank of Australia; it's why Aynsley became a banker
