Thursday 19 January 2017

Bank of Ireland will attempt to raise €2.2bn by end of February

Capital plan lodged with Central Bank aims at securing €1bn from private sources in effort to avoid state control

Published 06/01/2011 | 05:00

BANK of Ireland has told the Central Bank it will try to raise more than €1bn from private sources by the end of February.

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The commentary is contained in the bank's capital plan, which was lodged with the Central Bank in the last week of December.

It outlines how the bank proposes to raise another €2.2bn by the end of February to meet new capital targets.

Bank of Ireland and the Central Bank declined to comment on the proposals, although both confirmed that the capital plan had been filed.

It is understood to reiterate Bank of Ireland's intention to raise as much money as possible from private investors rather than taking cash from the State, which it already counts as a 36pc shareholder.

Some sources say the bank will target as much as €1.3bn from private investors, by offering new stock to existing shareholders and issuing new shares to the market.

These offerings are expected to be launched over the coming weeks, reflecting the tight timeline in raising the cash by February 28.

Bank of Ireland has already retained Credit Suisse as its adviser.

The bank is also believed to be targeting about €200m through 'liability-management exercises', where the bank buys back some of its debt at a discount. A recent liability-management exercise, which counts towards the €2.2bn goal, raised €700m in capital.

Investors

On November 28, Bank of Ireland told the stock market it would try to generate the €2.2bn through "a combination of internal capital management initiatives, support from existing shareholders and other capital market sources".

The bank acknowledged that the State would "subscribe for the incremental capital, should the bank not be in a position to raise sufficient capital" itself.

Several analysts have expressed scepticism about the bank's ability to tap the market for private capital.

Bank of Ireland investors have already been burned after stumping up more capital last summer.

It is also attempting to raise money against the spectre of another round of capital stress tests in 'quarter one'.

However, some observers fear these tests may impose even higher targets on Bank of Ireland, meaning that investors who buy in now face almost immediate dilution.

If Bank of Ireland fails to raise enough private money, it will then face becoming the fifth institution to fall under majority state control.

Sources stress, however, that the state ownership in Bank of Ireland is likely to be far lower than the "virtual nationalisation" of AIB.

The State effectively owns about 93pc of AIB and could own an even bigger stake by the end of February when AIB will also need more cash.

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