Anglo share price dropped by almost 50% on release of 2008 figures, Drumm trial told
Anglo Irish Bank’s share price dropped by almost 50% 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 0.94c at opening on December 3rd, to 0.48c at close of business on December 4th 2008.
Mr Hughes was giving evidence on day 74 of David Drumm's conspiracy to defraud trial at Dublin Circuit Criminal Court.
David 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.
The former Anglo CEO has also pleaded not guilty to false accounting on December 3, 2008, by furnishing information to the market that Anglo's 2008 deposits were €7.2 billion larger than they were.
Today Paul O'Higgins SC, prosecuting, asked what would have happened to Anglo's loan to deposit ratio if the €7.2bn transaction with Irish Life and Permanent was deducted from total deposits figure.
“It would make the ratio go up,” Mr Hughes said.
The witness 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”.
Mr Hughes said he attended Anglo's offices on the morning of December 3rd for the presentation of results.
He said he listened to David Drumm and other senior Anglo executives provide commentary 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% within three years,” it read.
During cross examination he agreed with Bernard Condon SC, defending, that Anglo suffered a very significant loss when its share price dropped from 94c to 67c in a single day on December 3.
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.
When asked by Mr Condon if he agreed that Anglo's results were disappointing, he replied that they were behind expectations.
“It wouldn't be inappropriate to say they were ravaged?” Mr Condon asked
“It was quite significant,” Mr Hughes replied.
Mr Hughes 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 his statement to gardaí in which the witness said there was no optimum loan to deposit ratio and it represented just one variable.
Mr Drumm accepts that the multi-million euro transactions took place in between Anglo and ILP in 2008 but disputes that they were fraudulent or dishonest.
The trial is now in its fifteenth week and continues before Judge Karen O'Connor and a jury of ten men and four women.
Judge O'Connor told the jury that the prosecution's case was now “very close to conclusion”.
