AIB shares slump over threat of EU order to sell units
Share slump: Allied Irish Banks. Photo: Bloomberg News
SHARES in Allied Irish slumped again yesterday as investors worried that the European Commission (EC) may force the bank to sell units and prevent it from raising equity until the outcome of talks with Brussels on state aid is decided.
The decline, which followed even larger falls last week, came as Royal Bank of Scotland said it may have to sell more assets than planned to comply with EU rules so that banks that receive state aid don't have an unfair advantage.
The parent of Ulster Bank will reportedly have to sell its Churchill and Direct Line insurance arm and part of its investment banking business. News of the enforced sell-offs comes on top of an expected sale of 312 branches in England owned by the bank.
Allied Irish Banks closed down 19.8c, or 10.6pc, at €1.68 while Bank of Ireland closed down 10c, or 5.6pc at €1.60 in Dublin yesterday. AIB fell as much as 14pc earlier in the day, the biggest decline in the 63-member Bloomberg Europe Banks and Financial Services Index.
The European Commission is forcing banks that took state money to sell assets and branches to ensure they don't have an unfair advantage. Bank of Ireland filed a restructuring plan with the European Commission in September while Allied Irish is expected to submit a plan this month.
Allied Irish chairman Dan O'Connor admitted last week that the bank could face "serious consequences" from its negotiations with Europe. The lender, locked in a dispute over the next chief executive with Finance Minister Brian Lenihan, has already received €3.5bn from taxpayers and analysts expect the Government will soon have to pour more money into the bank.
Clarity
"The threat of more significant EC requirements" may make it more difficult for Bank of Ireland and Allied Irish Banks "to raise equity until there is further clarity on the ultimate outcome of its decisions", Goodbody stockbroker analyst Anna Lalor wrote in a note yesterday.
Allied Irish, which owns units in Poland and the US as well as Goodbody Stockbrokers and AIB Capital Markets, did nothing to dispel worries of forced sales last week when Chairman Dan O'Connor said he didn't know what would happen to the organisation and declined to comment on the potential consequences for AIB.
- Thomas Molloy
Irish Independent
