Sunday 24 September 2017

Bank offloads assets 'below the radar' as it looks to slim portfolio by €20bn

Laura Noonan

Laura Noonan

AIB has already begun selling off assets as it "actively" pursues ways to slim down its portfolio by almost €20bn, executive chairman David Hodgkinson said yesterday.

News of the "below-the-radar" sales came as Mr Hodgkinson set out his vision for a "radically" changed AIB and promised an imminent injection of fresh leadership.

But despite the many changes facing AIB, Mr Hodgkinson insisted that the bank's "preference" was to remain listed on the stock exchange, even though the Government's stake could soon top 98pc.

AIB was ordered to downsize by €20bn under the latest banking restructuring package announced by the Government, which will see AIB get another €13.3bn in capital.

The bank yesterday said it had selected €25bn of loans to be transferred to a 'non-core' division that would be managed separately to the main group.

Loans

Land and development loans worth less than €20m, some UK loans and other international loans are going into the non-core division.

"The quality of some of the international loans [going into non core] is quite good so many of those will be saleable," Mr Hodgkinson said yesterday.

"We are certainly not depending on run down [customers paying back their loans], we have to be actively trying to meet our deleveraging targets."

The bank has hired London-based advisers to assist on disposals and has already made some "under-the-radar sales".

Mr Hodgkinson declined to comment on the prospect of imminent sales but said they would be carried out in a "timely and determined way" that didn't trigger fire-sale losses.

The bank boss admitted efforts to sell AIB's investment management division to Irish Life & Permanent had collapsed and under-bidders would be given an opportunity to re-enter the fray.

The remainder of AIB will be transferred to a newly created 'core' bank that will have €61bn of loans and a "capacity to meet customer demand" for new lending.

"I don't think anybody needs to be convinced of the need for radical change after the torrid time the bank has been through," Mr Hodgkinson said, promising an imminent shake-up of management and board members.

AIB has been hunting for a permanent chief executive since last autumn and Mr Hodgkinson said he now had a "good list of potential candidates from around the world", including several who had "said they were interested in taking discussions further".

Capital raising

Now that AIB has clarity around its capital raising and future structure, it hopes to be able to appoint a chief executive "by the third quarter".

The €13.3bn of fresh capital includes €11.9bn in equity and a €1.4bn debt instrument. AIB yesterday admitted it had little prospect of raising any fresh cash from the private market.

A decision on what action could be taken to eke capital from the bank's bondholders was a matter for the Government, Mr Hodgkinson said, though many observers believe gains can be gotten from a debtfor-equity swap.

If the bank doesn't get any capital from market sources, the State's stake could rise to more than 98pc.

Mr Hodgkinson said that even if the stake got that high, his "preference" would be to keep AIB on the stock exchange, citing the corporate governance benefits of maintaining a listing.

Staying on the stock exchange would also make it easier for the Government to ultimately sell down its stake, AIB's finance boss Bernard Byrne said.

Irish Independent

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