Crisis — what financial crisis? Kane is feeling very able again

Billy Kane is back as the head of Finance Ireland after learning from painful experiences in the downturn

BILLY KANE is a born survivor. A director of Woodchester, a trailblazing finance company in the 1980s, Kane was chief executive of Irish Permanent in the 1990s. He then floated his equity-release mortgage company as Finance Ireland (FI) in the Noughties, only to watch it swirl around the plughole of the great financial crisis.

After a tough couple of years, Kane is back scouring for opportunity. Finance Ireland’s First Auto has a 12% share of all forecourt finance in the roaring motor trade. Last month, the group became the first company outside the two pillar banks to access cash from the state’s Strategic Banking Corporation of Ireland (SBCI), and is starting to lend €50m of funds to small and medium-sized enterprises.

It has entered the “small ticket” commercial mortgage market and is managing more than €500m of loan books with Carval Investors. Next year, the plan is to lend €300m to garage owners and small businesses.

The company has hired Goodbody Corporate Finance to secure €25m from a strategic institutional investor. The deal is on schedule to close by the year’s end, the first in a series of fundraisings in a five-year plan that could see the company return to the stock market as a challenger bank.

“We are a few years and a lot of hard work away from that,” said Kane, dampening down the idea. “But we are ambitious.”

Following the capital raise, FI will have a capital base of €40m “which is where the UK challenger banks Aldermore and Shawbrook started from”, he said.

Now 60, the former photocopier salesman’s enthusiasm for the financial services game, severely tested in the recession, remains undimmed. “I love driving in here in the mornings,” he said. Head office is a beautiful period house in Ballsbridge, once home to AIB Corporate Finance. In 2013, the troubled bank sold the premises to Ardstone, an investment company, for €4.75m, and agreed to pay €3m to break its lease.

Finance Ireland bought the building, 10,000 sq ft of office space, in July 2014, for €4.65m with, somewhat ironically, a €3m loan from AIB. “We got it at a good time,” he said.

It is this mix of opportunism and good fortune that has dragged the company from the brink and given Kane’s career a new lease of life.

From Bray, Co Wicklow, Kane is one of the best-known names in the Irish financial services industry. His father was a well-known trade unionist and the family owned a shop just off the seafront that sold sweets, candy floss and souvenirs.

He got a bachelor of commerce degree from UCD, and worked for Leyland in the UK before getting a job with Rank Xerox and then Sharptext, selling photocopiers. He was headhunted by the fledgling Dublin leasing company Woodchester and its firebrand Scottish boss Craig McKinney.

He was employee No 7, and became director No 4, working alongside McKinney, Mary Broughan and David Dilger, who later became the Greencore boss. Kane, a millionaire before his 30th birthday, ended up heading its UK division. He left the bank in 1992, and approached Irish Permanent, then a building society, about setting up a finance division.

From a standing start, the Permo took a 35% share of the car finance market. Kane made £3.5m (€5m) selling his 10% stake in IPF back to the bank. He was promoted to general manager, banking and then, in 1999, was made chief executive.

After the Permo merger with Irish Life, Kane became chief executive of the bank. In 2001, Permanent merged with Trustee Savings Bank, led by Harry Lorton. “The plan was to have joint CEOs — which was never going to work,” he said.

Kane was itching to leave “the semi-state culture of Irish Life”, pocketed €500,000 in compensation, and set up Ship.

The company offered reversion or “lifetime mortgages”. Elderly homeowners could release equity from their homes through taking out a mortgage, which was repaid upon the sale of their home. He was backed by John Gunn, a British financier and one-time shareholder in Woodchester.

Ship then set up Nua, a subprime home loans company, as a joint venture with Investec. In 2006, Kane reversed Ship into Ardent, a cash shell company quoted on the London AIM exchange, and the renamed Finance Ireland announced grand plans to shake up the alternative lending market.

In October 2007, Investec purchased Start Mortgages, a rival subprime lender based in the UK with operations in Ireland. This triggered a clause in the Nua shareholder agreement which forced Investec to buy Finance Ireland’s interests. Kane’s company was paid €1m to jump off what would become a sinking subprime ship — and the money would come in handy later.

The plan was to finance the seniors’ equity release through the mortgage securitisation market. The business model imploded in the financial crash. Staff numbers went from 42 to just three. “We had some pretty lonely Christmas parties,” said Kane.

What followed were some “horrible days”. In 2008, Kane signed a €100m credit line with an international bank in London to fund a car finance business. The facility was withdrawn before it was ever drawn down — a remarkable piece of good fortune, as car sales tanked. It was another bullet dodged.

For three years, he travelled to London on the cheapest Ryanair flights he could find, seeking wholesale funding. “I remember the cost of the first flight was €15, less than the cost of the Stansted Express train,” he said. “Nobody wanted to touch Ireland.”

The company was based over a wine bar on Ely Place in Dublin 2. “It was like the Carlsberg ad, the one with the phone with all the dust that never rang,” he said. “That was us.”

Ship closed to new business in 2009, with 600 customers and €80m in loans. It was funded through Ulster Bank. Kane and his two colleagues were paid “a living wage” to manage the book.

Redemption emerged in the unlikeliest place. In 2011, Kane was approached by Brendan Keogh, whose family set up Everyday Finance, a consumer debt recovery business. It was bought by CitiFinancial Europe, which had a string of similar businesses throughout Europe. As the credit crunch bit in 2007, Citi exited consumer finance in Europe and sold the business back to the Keoghs. It was a small operation, a €30m loan book, with 30 staff in Galway.

For Kane, it was the light at the end of the tunnel. Finance Ireland bought the business for €1.4m, one-third paid in cash and the rest in shares. In the same year, Frank Donnellan, a former colleague who previously headed up the car finance operations of Bank of Scotland (Ireland) and Friends First, secured a deal with the UK finance house Close Brothers to secure funding for the car market here. Finance Ireland was back lending, and the blocks to rebuild the business were slipping into place.

Permanent TSB helped the cause, pulling out of the car finance market. In its first year, First Auto wrote €22m of car finance. This year, the forecast is €150m. The deal with Close has been renewed to 2019. PTSB also vacated the film finance market. Finance Ireland duly jumped in, funding 37 projects and with a value of €40m in 2014.

In a joint venture with Carval, Everyday picked up the management of Lombard and Friends First loan books — more spoils from the retreat of international banks.

The company raised €4m in equity from investors in 2013 and also raised a €5m bond from Avoca Capital, a KKR-owned global investment fund, to buy the equipment leasing business of the US bank CIT. It was yet another institution exiting the Irish market and another building block for Finance Ireland.

Kane once said that finance was all about lending, and then “differentiating your tenner from the other guy’s tenner”. Since 2008, the challenge has been getting the “tenner” in the first place. That is why the SBCI injection is a “game changer”.

The funding is “available and affordable”. Its cost is 1.9 percentage points below what Finance Ireland can access in the wholesale market. The company must show every cent of the savings is passed on to the customer. It wrote its first deal — a €92,000 leasing contract on a compressor — and there is a further €200,000 in the pipeline.

The downturn also punctured Kane’s personal wealth. He punted on a smoked salmon packaging company, a recycler of mobile phones and made an ill-timed investment in Simply Mortgages, a now defunct mortgage broker. “Yeah, I was a very enthusiastic investor,” he said, ruefully. How did they go? “They didn’t.”

An avid sailor, he sold his boat three years ago and “was happy to do so”. He backed a number of residential developments with his brother Walter, which “hurt us” when values fell.

The focus now is on spotting gaps in the market and identifying management teams capable of getting the business. Exiting and shrinking banks did not just leave behind loan books. “There are a lot of really good lenders out there,” he said. This is where Finance Ireland plans to challenge the pillar banks, both of whom have lost vast swathes of senior lenders. It can foster relationships with garage owners, with equipment suppliers, with small business owners and with the farming community. Residential mortgages are also in the plan, but some way off.

The Ship experience taught a number of valuable lessons — among them that Ireland is too small to specialise. “We are going to be like the hardware shop selling everything from the anchor to the knitting needle,” he said.