AIB shares rally 46pc as investors buy into new plan
Published 06/03/2010 | 05:00
Shares in AIB rallied 46pc during the week as investors piled into the new managing director's vision that the group will be able to raise most of the €4bn-plus analysts say it needs by flogging foreign assets.
The bank's shares closed at €1.44 yesterday evening.
Colm Doherty, who took over the helm last November, laid out his stall on Tuesday as the group revealed record losses of €2.3bn, that he will sell assets and bring in a strategic investor before going cap-in-hand to shareholders or the Government for capital.
"The appointment of Colm Doherty as managing director of AIB is, in our opinion, leading to a more constructive approach to dealing with legacy issues," said the influential banking analysts at UBS in a note to clients yesterday.
However, the Swiss broker added that AIB has set itself a "challenging target".
Its analysts said that funding remains a significant issue for the Irish banking system where aggressive competition for deposits is being combined with elevated wholesale funding costs.
"While NAMA removes the excessive property and developer risk from Irish banks, they remain exposed to the cyclical Irish risks," they said. "We expect high impairments to lead to another loss-making year in 2010 before a breakeven outturn in 2011."
Investors are also concerned about what sanctions Brussels will impose on AIB and rival Bank of Ireland on each of their restructuring plans over the coming months.
The banks will need clarity from the European Commission on these before they have any chance of going to the stock market to raise equity.
Bank of Ireland's shares jumped 21pc during the week to €1.21.