Anglo Irish Bank’s share price dropped by almost 50 per cent following the release of its preliminary year end figures for 2008, a jury has heard.
Eamon Hughes, a financial analyst with Goodbody Stockbrokers, said the bank’s share price fell from €0.94 at opening on December 3rd, 2008, to €0.48 at close of business on December 4th, 2008.
Mr Hughes was giving evidence on day 74 of former Anglo chief executive David Drumm’s conspiracy to defraud trial at Dublin Circuit Criminal Court.
Mr Drumm (51) of Skerries, Co Dublin, has pleaded not guilty to conspiring with former bank officials Denis Casey, William McAteer, John Bowe and others to defraud depositors and investors at Anglo by “dishonestly” creating the impression that deposits in 2008 were €7.2 billion larger than they were.
He has also pleaded not guilty to false accounting on December 3rd, 2008, by furnishing information to the market that Anglo’s 2008 deposits were €7.2 billion larger than they were.
Paul O’Higgins SC, prosecuting, on Monday asked what would have happened to Anglo’s loan to deposit ratio if the €7.2 billion transaction with Irish Life & Permanent was deducted from total deposits figure.
“It would make the ratio go up,” Mr Hughes said.
‘Concerning’
Mr Hughes told the jury that this ratio was a key metric used by investors when analysing the strength of a company. He said any increase in the loan to deposit ratio would be interpreted by the market as “a little bit concerning”.
The witness said he attended Anglo’s offices on the morning of December 3rd for the presentation of results. He said he listened to Mr Drumm and other senior Anglo executives comment on the figures.
“The presentation provides an important input into how we as analysts think about a company,” he said.
He said following publication of the preliminary results to the stock market at 7am, Goodbody produced a “first glance” for investors at 8am, before compiling a more detailed forecast.
The jury viewed a section of Goodbody’s report entitled ‘Thoughts on Results’.
“We would be a little bit nervous on the upswing in the loan to deposit ratio. This may dominate sentiment towards the results today. Anglo’s objective is to get this down to 100 per cent within three years,” it read.
Significant loss
During cross examination, Mr Hughes agreed with Bernard Condon SC, defending, that Anglo suffered a very significant loss when its share price dropped from €0.94 to €0.67 in a single day on December 3rd.
He agreed with Mr Condon that there was grave concern about Anglo’s ability to survive and that newspaper reports that day noted shares had slumped to their lowest level in 11 years.
“It was very traumatic,” Mr Hughes replied.
He agreed with Mr Condon that the loan to deposit ratio was just one of a number of metrics used by investors.
Mr Condon referred to Mr Hughes’ statement to gardaí, in which he said there was no optimum loan to deposit ratio and it represented just one variable.
The trial is now in its 15th week and continues before Judge Karen O’Connor and a jury of 10 men and four women.