AIB leak came at a good time for both Government and bank
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THE really interesting thing about leaks to media organisations is often who did the leaking and why. In the case of the leak about a Canadian bank taking a possible stake in Allied Irish Banks (AIB), these are particularly interesting and pertinent questions.
At first sight only three organisations could possibly have leaked the information. AlB, the Government or the Canadian Imperial Bank of Commerce (CIBC).
The latter is very unlikely. Why, after all, would a bank leak information that would inevitably raise the target's share price? This leaves us with either AIB or the Government.
Those two organisations both have strong motives for a leak. The leak was made towards the end of a disastrous week for the Government's plans to create the National Asset Management Agency (NAMA). The demise of Liam Carroll's property empire has really brought home to the public just how much they will overpay, in the short term at least, for the property that the Government will buy. Newspapers and the airwaves were full of chatter about the damage to NAMA and the agency's many opponents in academia (where there does not appear to be a single supporter of the plan) were also very much in evidence. This created dreadful mood music for the Government as it prepared to reconvene the Dail next month.
From a public relations point of view, it is hard to think of a better suitor. After AIB's dalliances with all sorts of deeply unsuitable characters which has got her into trouble and left her reputation in tatters, what could be more delightful than the knowledge that the global banking equivalent of the pastor's son fancied AIB and was even wooing the bank?
That Green Party members were also likely to be seduced by the most solid and responsible banking sector in the world was surely a happy coincidence and will undoubtedly do the party's NAMA supporters some good when they try to persuade their party colleagues in an upcoming vote on NAMA.
"Look man, even the Canadians like NAMA" would go down a lot better than suggesting that some emblem of red-blooded capitalism such as a New York merchant bank was preparing to buy a stake cheaply once NAMA had cleaned up.
There are many reasons, in short, why the Government would have been happy to see the news in the public domain but there also good reasons why AIB would have been happy. Friday's leak totally overshadowed a devastating report by Canadian investment bank RBC which predicted both AIB and Bank of Ireland would be nationalised in the autumn.
This report by two of the world's top rated analysts was lengthy and well reasoned and landed some real blows to the banks which they described as being in a "negative state" and totally dependent on lending from the European Central Bank. It ended by urging bond holders to sell debt not covered by the Government's guarantee scheme and reduced the analysts' rating to the lowest level it could.
There isn't much institutional interest in the Irish banks these days so reports by analysts from overseas banks are few and far between. It would of course, be impossible for an analyst in Ireland to write such a report (forecasts of forced nationalisation would become a self-fulfilling prophecy) so we really have to rely on analysts overseas to know what investors are thinking. It is not a good outlook for the banks if both independent domestic economists and overseas analysts expect nationalisation within months. It must have been a very welcome coincidence that there was a leak of an expression of interest at some distant point in the future after NAMA has been created.
While both the Government and AIB have benefited greatly from the leak and the impression it creates of a banking system that is once again attractive to investors, nobody should jump to conclusions about the leak.
The leaking of price sensitive information is, after all, a criminal offence and it would be grossly unfair to either the Government or the banks to suggest that they would engage in criminal activities. It must have been somebody else.
- Maeve Dineen
