Bank of Ireland shares slide as Ross and Watsa sell some of their stakes

Tuesday 04 March 2014 17.55
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Wilbur Ross and Fairfax set to sell some of their Bank of Ireland shareholding
Wilbur Ross and Fairfax set to sell some of their Bank of Ireland shareholding
Wilbur Ross has described his stake in Bank of Ireland as his 'best investment since the financial crisis'
Wilbur Ross has described his stake in Bank of Ireland as his 'best investment since the financial crisis'

Shares in Bank of Ireland closed more than 9% lower in Dublin trade after it emerged that Wilbur Ross and Fairfax are selling some of their stake in the bank.

6.4% of the bank's shares are being offered for sale. 

Billionaire investor Ross and Fairfax boss Prem Watsa were among a group of North American investors who kept the bank out of State hands in 2011 when they bought a 35% stake only months after Ireland signed up to an EU/IMF bailout.

The group invested in the bank when the share price stood at about 10 cents.

The shares have risen significantly since then, jumping 120% last year and hitting a high of 39 cent this year.

But Bank of Ireland shares closed lower in Dublin today after slumping 7% yesterday following the publication of its full year results.

The bank said it returned to profit in the first two months of the year and had cut its full-year loss by almost two thirds in 2013 thanks to improved margins and a fall in the number of homeowners in arrears. The shares had risen by 25% in the month before the results. 

Mr Ross owned more than 2.9 billion Bank of Ireland shares, or 9.1% of the bank, before today's announcement. Fairfax held 2.8 billion shares, or 8.7%.

The billionaire told news agency Bloomberg that he decided to sell some Bank of Ireland shares after Deutsche Bank approached his firm.

He said he had "not been shopping the block" and had "no present plans to sell any more of our holdings".

He told Bloomberg that he remained "totally confident" in the strategy of the bank's management and was happy to be retaining the majority of his position.

Fairfax has since gone on to invest in Greece, announcing an increase in its stake in property company Eurobank Properties in October, while Mr Ross told Reuters last year that he was keen on financial assets in Spain, another distressed euro zone market. 

The two were the second and third-largest shareholders in the bank behind the Government. Finance Minister Michael Noonan told Reuters in December that while the Government had no interest in running banks in the long term, it was under no financial or political pressure to sell.

A spokesman for the Department of Finance said today that its strategy remained unchanged and the Government would reduce its shareholdings in the banks at the right time. 

Fairfax plans to hold on to rest of Bank of Ireland shares

Meanwhile, Fairfax Financial has no intention of offloading any further stock in Bank of Ireland following the sale of part of its holding today, its chief executive Prem Watsa told Reuters.

"Bank of Ireland has been one of our most successful investments. Because of the significant appreciation we are rebalancing our position. The position had become very significant (in terms of our overall portfolio)," Watsa said.

"We remain strong supporters of Richie Boucher and Bank of Ireland. Bank of Ireland will benefit from the ongoing recovery of Ireland and we have no intention to sell any more of our stake. We are long-term investors," he added.

The shares were being sold at a guided price of around 33 cent, a discount of up to 10% on Monday's closing share price, a source familiar with the transaction said.

Watsa declined to say what the Bank of Ireland proceeds would be invested in, pointing out that Fairfax holds $8 billion in cash.

Wilbur Ross has described his stake in Bank of Ireland as his "best investment since the financial crisis".

The company he founded, WL Ross, specialises in "turnarounds" - investing in companies which are in difficulty and reaping the benefits of helping them recover. 

Speaking last year, Mr Ross said there were plenty of potential opportunities in recession-hit countries but that Ireland stood out as it was "a very unique economy".

The other investors in the bank who bought shares in 2011 included Wilson Kennedy - who has since sold its stake - Fidelity Investments and the Capital Group.