‘We had to roll up our sleeves and remind ourselves how to lend’
After overseeing restructuring in several challenging roles, the head of commercial lending at Finance Ireland tells Gretchen Friemann about starting over
KTrue to form, Murnaghan downplays the work required in conjuring a business out of air. He does point out that the new division in Finance Ireland did not have the advantage of an existing balance sheet. “As well as building up the team, the franchise and the customers and all that, we also had to build up the capital and funding”. In that context, “every loan counts”. The painstaking growth has paid off. Murnaghan’s business, launched in 2017, now controls a €150m-plus loan book and is racing towards the €200m mark. In three years he expects that figure to expand to €500m and is targeting €1bn in five years.
The upswing in momentum however is likely to hinge on a successful maiden securitisation or bond issuance. Murnaghan cut his banking teeth at AIB’s leveraged finance unit, a riskier form of finance, typically relied upon by private equity firms to back a takeover deal. Shepherded by Robert Gallagher, head of AIB’s corporate markets division and now the chief executive of Activate, a private equity and State-backed lender, Murnaghan turned his hand to securitisation and collateralised loan obligations, an esoteric corner of the market but similar to other securitisation vehicles in that it issues multiple tranches of debt.
In 2015, Dublin-based lender Dilosk forced open a window in the mortgage-backed securitisation market with a €206m bond deal secured against a book of former ICS mortgages.
Murnaghan wants to launch something similar, which would mark a major milestone, and, he says, enable the firm to raise funds at lower rates.
It’s all a far cry from the relentless slicing and dicing at Ulster. While Murnaghan is keen to present that experience as a valuable lesson, he conceded “it is wearisome making things smaller and of course it is emotionally draining”.
After seven years of restructuring, the entrepreneurial chutzpah of Billy Kane’s new venture must have seemed a breath of fresh air.
The two hit it off in 2014 over a cup of coffee. Murnaghan maintains the meeting was intended as a routine “social catch-up”. “As head of business banking my job was to talk to people all the time”. Kane was scouting for opportunities. He was convinced the retreat of the banks presented an opportunity for more nimble players.
Kane has spoken of this ambition in the past. Murnaghan reiterated an initial public offering of takeover remain the “likely exit routes” for investors.
But the whiff of animal spirits extends across the board. All the directors, including Murnaghan hold equity stakes. So too do the senior lending managers. “We’re all invested in how to make this bigger and better for all of us.”
So far the business has issued over 80 loans at an average size of €1.75m. Murnaghan calls it “granular”, meaning, he explains in measured tones that even at this soft pitch seem to echo through in the firm’s elegant boardroom.
“We all had to roll up our sleeves and remind ourselves of how to lend”.
Finance Ireland is housed in a prominent period house, opposite the former Burlington Hotel. It was snapped up by Kane in 2014, for €4.65m, who buttressed the deal with a €3m loan from AIB. Ironically, the partially nationalised bank sold the 10,000sq ft to an investment firm in 2013 for €4.75m. It forked out €3m to break its lease.
Each successful mortgage deal is celebrated by the team. Murnaghan points out the financial evisceration triggered by the crash was not limited to the banks. Borrowers also took a hammering. The experience taught them “how to manage a lender”. In this ‘new environment’ businessmen eager to escape the clutches of a distressed debt or private equity fund have become particularly skilled in navigating a financial tightrope. “They know how to manage their loan relationship sufficiently well so they are still in control of their assets, and I suppose not so sufficiently well that they have encouraged their lender to foreclose against them,” says Murnaghan.
So it has been an “education” for us. “We have had to figure out how to lend safely” in this market.
Murnaghan, clean-shaven, clad in a sharp suit, and exuding the rectitude the public, long ago, once associated with the banking profession, swiftly shuts down the conversation when asked about the anticipated loan default rate on the book. Instead he bemoans the industry’s patchy data on this front, pointing out this paucity of meaningful information remains a key obstacle for international investors.
But at the end of this year Murnaghan, who once chucked in a Green Card for the US after becoming enthralled by the fast-paced life in Hong Kong where he wound up working as a tax consultant for EY, will have spent the guts of four years at Finance Ireland.
The question is will this small, rapidly maturing business manage to confine the restless ambition of a banker that by his own admission has thrilled at the opportunity to pursue sharply diverting paths.
We’re all invested in how to make this bigger and better for all of us. It has been an education