Be careful the advice you take – especially mine

I bought Bank of Ireland shares a few years ago. They were a good price. It was 2015. They have since been consolidated meaning I have fewer shares than I originally bought.

What is your advice on Bank of Ireland shares and what other shares would you advise buying?

Ms Y.O’S., email

This brings to mind one of the more humbling memories of my time dealing with financial queries.

What are the rules on inheritance for my family in Australia?

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Relief on capital gains for selling part of our home.

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Moving in now to a property I will eventually inherit

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Tax and leaving money to religious orders in my will

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Many years ago, a colleague approached me asking what I thought of the prospects for Bank of Ireland shares. At the time, they were trading just above €6 but had been trading not long previously at €18. My colleague had some of these shares and was understandably worried about whether to sell or not.

Now, as regular readers of this column will know, I am not a qualified financial adviser, nor am I registered with the Central Bank. So, to put it bluntly, I am not allowed provide specific financial advice to people in the column – i.e. should they invest in A or B, though I can certainly point out general rules of tax and investing.

But this was not formal advice, simply a conversation between friends: and they knew exactly what my qualifications and legal position were.

Having given them the caveat that I had no great insight into the bank’s shares, I opined that I would be surprised if they didn’t bounce. After all, I said, they had already given up two-thirds of their value and it was hard to see how they could go much lower. That seemed to be the gist of stockbroker analyst opinion at the time, I ventured.

Well, we all know how that went. Bank of Ireland tumbled down to penny status as the State was forced to bail it and others out at a cost that taxpayers will continue to bear for years to come, servicing a national debt that – on a per capita basis – is among the heaviest in the developed world.

I never asked my friend whether they took my advice and stuck with the shares. As time passed, I fervently hoped they hadn’t but their silence on the issue persuades me that they probably did – and paid a price with the loss of most of what was left of their investment.

Everyone has their personal memories of the financial crisis and – apart from a general belt tightening that we all suffered – this is mine. It is also a salutary reminder of precisely why the Central Bank rules on financial advice are in place.

You don’t say when you bought the shares in 2015 but, in general, you would have lost about 25 per cent of their value by the time the bank consolidated its share register in 2017.

The actual consolidation would not have left you at a loss – the one new share you got for every 30 shares held was the same as every other shareholder experienced. There were no new shares issued by way of a rights issue or placing Whatever percentage of the bank you owned before the consolidation was precisely the same as your stake when it was over.

However, the shares have continued to struggle and are now trading around the €3.60 level – just under half the price at which they were trading immediately after the consolidation.

So you, along with all other shareholders, have lost money on the investment.

Should you stick, or should you sell?

As you can tell from the story above, I have no idea nor any particular insight – even if I was allowed to advise you.

What I can say is that profit margins at the Irish banks remain under pressure. Most are still battling with non-performing loan portfolios – as well as restrictions on new lending put in place through Central Bank rules and ECB requirements that banks hold certain reserves to ensure they are not left vulnerable to any future run.

Negative ECB interest rates make it even harder for the Irish banks to recover their health as Ulster Bank chief executive Jane Howard said in this paper last Friday.

That is general reflected in the share price performance of Irish banks.

Can it change? Sure, but that’s not a given. When? Who knows? We’re a long time on from the crisis at this point and many of the issues have not yet been addressed.

What other shares should you buy? Well, for the reasons outlined above, I can’t offer advice, even if I had some to give.

What I can say is that if your investment is concentrated solely in Bank of Ireland, or in just one or two stocks, you should look at diversifying. Don’t have all your money in Irish – or even in European – investments; and don’t invest in just one business or sector. Oh, and keep an eye on charges. Especially in the Irish market, these can make it considerably more difficult to generate a positive return.