AIB shares fall nearly 8pc over lower estimate for M&T stake
SHARES in AIB dropped almost 8pc yesterday after the embattled bank announced that its shares in America's M&T would be sold at the lower end of analysts' expectations.
AIB has pitched its M&T shares at $77.50 apiece, a price that implies the entire stake will fetch about $2bn. Analysts had been expecting between $75 and $95 a share.
Market sources stressed, however, that yesterday's pricing shouldn't have come as a "major surprise", since AIB had announced plans for an institutional placement on Tuesday.
When that announcement was made, M&T's shares were trading at $83.09 a share.
"The price would have had to be at a discount to that," one source said, pointing out that the higher end of the $75 to $95 range could only have been achieved through a trade sale.
"The price wasn't a surprise, given the size of the placing, but it was still incrementally more negative than positive in terms of the range mentioned in recent months," said Ken Darmody of Goodbody's.
AIB holds 22.5pc of M&T's stock and is now putting all of that on the market. The sale is being co-ordinated and underwritten by Citigroup and Morgan Stanley, who will mop up any shares not bought by the market.
Analysts also pointed out that yesterday's share price fall also reflected the latest downgrades of Ireland's sovereign debt and concerns about Irish banking.
The bank's shares closed at 41c, just shy of its year low of 37c. "It still looks expensive to me," said Sebastian Orsi, of stockbrokers' Merrion, pointing to the significant dilution in store for AIB's shareholders.
The bank has a market capitalisation of €440m and is planning a €5.4bn equity raising next month. The deal, which is being underwritten by the Government, could see the State's stake in the bank rise to 92.5pc.
The M&T deal will release €900m of capital, while AIB has secured another €2.5bn capital benefit by agreeing to sell its Polish interests to Spanish banking giant Santander.
The bank hopes to raise another €1.4bn in capital by selling business in the UK and 'smaller assets'.