BoI’s assets arm suffers €16bn meltdown

BANK OF IRELAND’S asset management arm has suffered a €16 billion meltdown as key North American clients stripped it of business on the back of a poor investment performance.

The bank, which published half-year profits of €848 million yesterday, said funds under management belonging to American and Canadian pension and investment funds had tumbled from €23bn to €6.6bn over the last 18 months - a decline of over 70%. Over €13bn of the fall took place over the past year.

Profits at Bank of Ireland Asset Management (BIAM) slid to €51m for the six months to September, down from €70m in the same period last year. The bank said full-year profits would be around €40m lower than last year’s €125m, as a result of lost fund management fees and commissions.

The slump has resulted in a dramatic shift in BIAM’s client portfolio. North American clients now account for just 15% of the unit’s funds under management, down from 36% a year ago. It now relies on Irish clients for 70% of its business, compared with 46% in September 2004.

BIAM’s total funds under management have fallen from nearly €56bn a year ago to €43bn. Clients have given notice to the bank that they plan to withdraw a further €1bn in the near future.

But the unit has offset some of the falls in its North American client base with better news from clients in Ireland.

BIAM’s woes began in early 2004 when its investment performance came under the spotlight after failing to match gains recorded by major rivals. It subsequently lost four top executives who defected to join an Australian rival late last year.

Bank of Ireland chief executive Brian Goggin said yesterday that there would be “no quick fix” for BIAM’s problems and that it would take up to three years for the unit to recover.

Mr Goggin, who headed up BIAM before being promoted in May last year, has hired asset management heavyweight Kevin Dolan from Paris-based investment specialist Rothschild to oversee the unit’s recovery.

Yesterday’s results also revealed a 7% decrease in the bank’s profits in Britain, which accounted for 26% of group profits at €164m.

Mr Goggin said the previous year’s figures had been boosted by a technical item worth almost €15m and that the performance was flat if this was stripped out. Mortgage and business lending grew strongly, with total lending 19% higher at around €40bn.

The bank’s joint venture with the British Post Office, which sells personal loans, credit cards, car insurance and investment products, has now signed up 225,000 customers and remains on track to meet the 400,000 target set for next March. Car insurance accounts for around half of the customer base.

Personal lending through the joint venture has yet to break the stg£100m (€145m) barrier, however.