BoI to launch €4.2bn capital raising plan within weeks
The bank insists falling into state ownership is far from a foregone conclusion as it looks to tap the markets
Published 15/04/2011 | 05:00
BANK of Ireland yesterday vowed to unveil a €4.2bn capital raising plan within weeks and insisted that the bank's descent into majority state ownership was "not a foregone conclusion".
The comments came as BoI revealed losses of €950m last year, marginally ahead of analysts' expectations and significantly better than the €2.2bn loss in 2009.
BoI is hoping to be able to raise €4.2bn in capital to meet the demands set by the latest banking stress tests without having to take another equity injection from the state.
Central Bank governor Patrick Honohan has said all Ireland's major banks were realistically set to fall into majority state ownership as a result of the €24bn industry-wide capital demand that stemmed from the stress tests.
Asked if that held true for BoI, the bank's CEO Richie Boucher said "that is not a forgone conclusion". The bank will unveil detailed capital raising plans "in a couple of weeks", according to its chief executive.
"The most important thing is that the taxpayer sees the investment they didn't want to make in the banks reduced," Mr Boucher said when asked if the bank was determined to stave off state ownership.
BoI will be going to the market for new cash against "difficult trading conditions" in its core Irish market, but executives yesterday insisted there was an "investment case" to be made.
BoI's losses are reducing and last year's losses were aggravated by a €2.2bn hit on loans transferred to Nama which will not be repeated, they said.
The 2010 accounts also showed that BoI was dependent on €23bn of funding from the European Central Bank at the end of 2010, plus another €8bn of emergency liquidity channelled through the Central Bank of Ireland.
The last resort cash accounted for about 20pc of Bank of Ireland's total funding at the end of year.
Mr Boucher said the bank would be weaned off all central bank money "well within" the period to the end of 2013.
The bank is also keenly aware of the need to come off the Government guarantee scheme, both to restore "confidence" and to eliminate the €350m annual cost of the guarantee, finance boss John O'Donovan said.
The other key element in yesterday's presentation was BoI's disclosure that its deposits had "stabilised" in November.
Retail deposits were "exceptionally resilient" throughout the crisis, Mr O'Donovan said.
The latest bank restructuring plan will see BoI slim down its asset base by €30bn over the next three years.
The bank yesterday said that some €10bn of the target would be achieved through disposals.
Life insurance division New Ireland is already being prepared for sale, and the bank's approved business plan also includes selling off mortgage lender ICC.
"It [selling ICC in this market] would not see to be sensible, but we'll do what we have to do," Mr Boucher said.
The BoI boss declined to comment on speculation that BoI will ultimately be merged with Permanent TSB.
Despite the higher-than-expected capital demand resulting from the stress tests, Mr O'Donovan said the bank believed they had performed a useful function.
"The stress tests should cauterise any residual doubt that has been on people's mind about the Irish banking system," he said.