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Interesting hatchet job on BoI's Boss Francesca McDonagh in the current edition of The Phoenix Magazine.
One of her main objectives is to ensure that the bank has a 50:50 gender ratio by 2021. That's the kind of creative strategic thinking outside the (ahem) box that's bound to help BoI's share price!
Read that article. 'Moneybags' could barely keep a straight face.
Only a 44yro female CEO would come up with that kind of ****. Biggest share price drop in a single day for the bank in 10yrs. Francesca might be getting her P45 soon.0 -
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bcklschaps wrote: »Read that article. 'Moneybags' could barely keep a straight face.
Only a 44yro female CEO would come up with that kind of ****. Biggest share price drop in a single day for the bank in 10yrs. Francesca might be getting her P45 soon.
Anyone want to post it here please?
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Anyone want to post it here please?
This is the article. The Phoenix, Date: July 25, 2019
FRANCESCA MCDONAGH’S PROBLEMS AT BANK OF IRELAND
THE CHIEF executive of Bank of Ireland (BoI), Francesca McDonagh, has overseen a total clear-out of all the top management inside the bank since she was appointed in October 2017. This is pretty drastic stuff and the relatively inexperienced CEO will need all her wits about her in the wake of such a shake up. Since taking charge, McDonagh’s record is less than impressive and her aim of making BoI the “champion bank in Ireland” looks like pure fantasy when the bank’s performance is measured against its prime competitor, AIB.
The most senior of the departing executives, BoI’s finance director for the last 15 years, Andrew Keating, announced his departure last month, while the departure of Des Crowley, head of the BoI (UK), was announced a month before that. These latest changes in BoI’s senior executive team come on top of the departure last year of the head of the core Irish retail division, Liam McLoughlin; Pat McSweeney, head of BoI’s global markets division; Mick Torpey, head of corporate & treasury division; Peter Morris, head of governance; and Lewis Love, chief operating officer. This represents a substantial changing of the guard.
While the government-imposed pay cap may be a factor, clearly McDonagh is being fully supported through this dramatic overhaul in the bank’s key personnel by BoI chairman/governor Paddy Kennedy (ex-Greencore and Paddy Power Betfair), who took over the senior role in August last year. At 50, Kennedy has more experience than his 44-year-old CEO, but it is hard to gauge what level of guidance McDonagh has been getting from the BoI chair during this fundamental senior staff clear-out.
In her ‘state of the nation’ address to investors in June last year, nine months after her appointment, McDonagh announced her strategic plan, with the key ambition to “become the national champion bank in Ireland”. This sounds like PR blather, although her other stated ambitions – to “grow the loan book by 20% by 2021” and target “a reduction in our cost base to €1.7bn by 2021” – were, if anything, relatively modest.
Bank of Ireland
To be the “national champion bank”, obviously BoI needs to comprehensively beat AIB in the marketplace. And while doing so, the objective is to “transform the bank, serve customers brilliantly and grow sustainable profits”. This sounds like more public relations blather, with McDonagh telling the Oireachtas Committee on Finance of her plans to “embed the culture and values we want” within the group.
Apparently, during 2018 “over 6,000 colleagues attended over 50 roadshows… We have seen a significant improvement in staff engagements… There are the net promoter scores and we look at verbatims.”
Less surprisingly, maybe, McDonagh has also announced that “all management and leadership appointments will represent a 50:50 gender by the end of 2021”.
What is concerning about all these pronouncements is the bottom line outcome. Having been appointed in October 2017, McDonagh had a full year to improve the bank’s performance during 2018 and, against a favourable economic background, this should have been more easily achievable than in the preceding years, particularly with the absence of real competition in the Irish banking sector.
She did manage to increase gross new lending last year by 13% to €15.9bn, but the vast bulk of this was eaten up by customers paying off old loans and the net new lending only came to €1.3bn. The total loan book increased to just over €76bn – significantly bigger than AIB’s €61bn.
Nevertheless, despite a 3% reduction in costs to €1.94bn, BoI’s pre-impairment operating profit fell last year by 11% from €829m to €740m. Last year, AIB turned in a pre-impairment operating profit of €1.05bn – that is 42% higher than BoI.
Considering that BoI’s €76bn loan book is 25% bigger than AIB’s E61bn, this is hard to understand and impossible to reconcile with McDonagh’s claim that she wants the bank to be “the national champion bank in Ireland”. It is frankly ludicrous to make statements like this if, on the key measure of profitability, BoI is so dramatically behind AIB.
It is also a worry that, in 2017, BoI’s key net interest margin fell from 2.24% to 2.2% last year. Although this is going backwards, McDonagh has targeted a margin of 2.24% by 2021. Given that AIB is already at 2.47%, this looks less than ambitious and further undermines BoI’s ambition to be “national champion bank”.
CREDENTIALS
While McDonagh had 20 years’ experience with HSBC and became group general manager of retail banking in Europe, the annual report clearly overstates the 44-year-old’s credentials: “A skilled global banker, renowned for strategic thinking and a proven track record in successfully executing strategy. A history of delivering strong financial performance coupled with leadership of transformation to drive future results.” So far, McDonagh has dumped all the bank’s senior managers while claiming to have created a new and more feminine-orientated culture, but profitability is going backwards and further lagging behind AIB.
Announcing the new initiative that BoI is re-entering the Irish mortgage brokerage market is a pretty uninspiring move. All Irish insurance brokers are crying out for access to mortgage funds and, of course, they have to be paid their 1% commission, which will eat into margins. The move simply retraces the strategy adopted by BoI when it was working through the ICS Building Society, which it flogged off a few years ago.
TRACKER IMPACT
Patrick Kennedy
Patrick Kennedy
It is hard to be optimistic about McDonagh’s chances of steering BoI ahead of AIB given the lack of any evidence that the current gap is set to close any time soon. It would certainly take a real “skilled global banker” to pull this off, but there are worrying signs. McDonagh spent her whole career working for one of the biggest banks in the world, HSBC, having joined it when she was a 22-year-old graduate (having studied politics, philosophy and economics).
Climbing the ladder inside a huge organisation like this requires almost as much diplomatic skill in office politics as raw talent. This is not to say that McDonagh does not necessarily have what it takes but, while the CEO has been dealing with BoI’s cost base and IT platform, this is true of every other bank as they increasingly move to remote automated platforms.
Having a relatively young chairman in the form of 50-year-old Kennedy is another factor when assessing BoI’s future trajectory. Very unusually, the BoI annual report doesn’t give the ages of the executive and non-executive directors.
Where McDonagh has been impressive is that, on joining the bank, she was upfront about the tracker scandal impact, which BoI had previously sought to minimise. She was ahead of the curve by admitting that BoI may have underestimated the number of cases involved, stating that there could be a further 5,000 possible cases on top of the 8,500 already known. This brought the total number of cases up to 13,500, with McDonagh increasing the provision to cover the cost of these by a whopping €200m.
However, it is easy enough to take steps like this when you are new in the job and the blame is safely attached to the previous regime. It could well be that the whole top management team in BoI was simply not up to scratch and that McDonagh was right to perform a clean sweep, no doubt backed in this by her chairman.
GENDER RATIO
On top of this there is the commitment to a 50:50 gender ratio “in all new management and leadership appointments by 2021”. This is a laudatory aim, but does not necessarily guarantee ending up with the very best management team available.
Given how far BoI is behind AIB in profitability, despite the former having a bigger asset base, closing this gap should be the key concern for McDonagh and Kennedy.
So far McDonagh has made all the right noises, but has underachieved on the bottom line. If she cannot at least match AIB on this measure, this will surely ultimately be the €950,000 pa CEO’s undoing. Her remuneration clocks in at just under double the government’s current €½m limit for senior bankers in the likes of AIB (where Bernard Byrne recently called it a day).
Certainly, the stock market has been underwhelmed by McDonagh’s performance. From a share price of €8 in January 2018 just after she joined, investors have seen the price almost halved to a current €4.65. Nevertheless, it is noted in the annual report that the bank’s dividend for 2018 was 16c per share, an increase on the 11.5c in 2017.
At the current share price of €4.65, the shares are on a trailing price-earnings multiple of eight. This is not the kind of rating the market gives to “champion” banks.
The annual report cover features a young girl’s face with the tag line “Enabling our customers, colleagues and communities to thrive”. If it was a Department of Social Welfare report, you might deem this as appropriate but, for a world champion bank in Ireland, the message fails to inspire.0 -
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