Banks may raise capital in early 2010
Thursday November 05 2009
Allied Irish Banks and Bank of Ireland may try to raise fresh capital in the first half of 2010 and avoid becoming majority owned by the state, according to the head of a group representing the country’s biggest investors.
“I would expect to see a rights issue” by Allied Irish Banks and Bank of Ireland “well supported,” Gerry Keenan, chairman of the Irish Association of Investment Managers, said in an interview yesterday. “The international view of Ireland Inc. has improved significantly, and the banks-as-rights-issue story is a vote on Ireland.”
The lenders may need the money after the government buys property loans from them in an effort to cleanse their balance sheets.
While the state already has a 25pc stake in AIB and Bank of Ireland after investing €7bn, Keenan said it’s “not inevitable” that the taxpayer will end up with a majority stake.
Five chief executive officers of Irish banks have resigned since the banking system came close to collapse late last year. AIB is currently searching for a new CEO and Finance Minister Brian Lenihan favours an external appointment.
There have been reports in the media over the past two months that the bank wants to appoint Colm Doherty, the head of its capital markets unit.
AIB Chairman Dan O’Connor said last week the lender is having a “good dialogue” with the Finance Ministry on the appointment process.
‘Acceptable’
The investment association has a “strong view that it’s the job of a board to find a candidate that’s acceptable to all stakeholders,” Keenan said, adding that the group would “never have a view on a particular candidate.”
AIB and Bank of Ireland will hold off on any share sales until the government’s plan to buy the loans progresses and the European Union rules on their restructuring plans, said Keenan, whose members manage about €210bn.
While the EU is reviewing bailouts to ensure that banks getting government money don’t have an unfair advantage, its judgment may not present problems for Ireland, Keenan said.
ING Groep NV of the Netherlands last month agreed to demands that it sell it's insurance units to secure approval for a state bailout.
“ING’s core banking franchise has remained intact,” Keenan said. “If you apply that to Bank of Ireland and Allied Irish Banks, you’d expect the core business to remain intact.”
He said the narrowing spread between Irish and German bonds and the ability of the banks to raise funding not covered by the government guarantee indicate new appetite for Irish assets.
The yield between the 10-year German bund and the Irish equivalent was at 143 basis points yesterday, half the spread in March.
“Ireland Inc. is back in business,” said Keenan.
- Dara Doyle
© Bloomberg
