AIB warning on negative impact of more downgrades
Published 13/10/2010 | 05:00
AIB has warned that any further downgrades from ratings agency could have a "materially negative impact" on the bank's financial and funding position.
The warning is included amongst a litany of "risk" factors outlined in a detailed prospectus on the bank's plans to sell its 22pc share in US-based M&T.
The document also confirms that AIB's trading conditions have become "increasingly challenging" in recent months and that the bank expects a decision on its restructuring plan by "late 2010/early 2011".
The risk factors are the most prominent feature of the prospectus, reflecting the bank's legal obligation to make its shareholders aware of any potential adverse developments.
AIB and other Irish banks have been hit with a raft of downgrades in recent months, with ratings agencies citing difficult banking conditions coupled with weakness in the Irish sovereign's finances.
"Any further downgrades, or delay in upgrades, in the credit ratings of the Continuing Group (AIB) could have a materially negative impact on the volume and pricing of its funding and its financial position," the prospectus warns.
AIB says that while it has issued term funding of €6.6bn in 2010, most of that debt is for two to five years, with the bank already suffering from "limited access" to longer-term borrowings.
AIB also warns that further downgrades could "weaken" the bank's "competitive position in certain markets" and could lead to "significant withdrawals of corporate or retail deposits".
Beyond downgrades, AIB cautions that plans to downsize the bank's operations could trigger "industrial action or other labour conflicts including strikes".
The bank was believed to be poised to shed some 1,000 jobs before the dramatic developments at the end of September when the bank was effectively nationalised and its two top managers agreed to step aside.
Trade union sources last night said that the "momentum" had gone out of job cut talks in recent weeks amid uncertainty around AIB's future management.
"We don't have any plan to ballot members in AIB at this time," said a spokesman for bankers' union, the IBOA.