Goodbody may be sold as part of AIB restructure
Published 15/01/2010 | 05:00
Goodbody Stockbrokers could be put up for sale under one of the measures being considered by Brussels as part of the restructuring plan for Allied Irish Banks, the firm's parent, according to sources.
A sale of the brokerage is highly unlikely to deliver a capital gain to shore up the diminishing equity reserve ratio of AIB, as bad loan losses continue to spiral.
However, the upside for the bank is that it would no longer have to hold a pool of capital against the brokerage. But sources said it would also shave off over 260 employees in one fell swoop from the group's cost base, lower regulatory risk and allow AIB to pursue its "back to basics" banking strategy.
AIB acquired the brokerage in 1990, when it was then named Goodbody James Capel, in a reported £20m-plus (€25.4bn) deal. At the time, the firm was 65pc-owned by its management, with the remainder in the hands of London brokers James Capel.
An informed source said yesterday that a possible sale of Goodbody's is "a suite of measures" the European Commission is looking at as part of AIB's restructuring plan, submitted in November and necessitated by the group's €3.5bn State bail-out last May.
However, it is not believed to be a core element of AIB's five-year plan to set itself on a viable path and pay back the Government investment.
AIB declined to comment, other than to say: "As we've said before, we'll be examining all our assets."
It is widely understood that AIB's 23.9pc stake in US associated M&T Bank and its 70.2pc-owned Polish unit Bank Zachodni WBK will be sold either under the direction of Brussels -- or as the group sets out on its own course to raise much-needed capital.
Analysts estimate AIB could generate at least €2.5bn of capital from the sale of its two main foreign assets. But it would need to raise a further €2bn -- either from investors, or from a conversion of the Government's preference share investment into ordinary shares -- to leave it with an 8pc equity tier one capital ratio.
The perceived strength of Goodbody's counterpart standing, as part of the state-guaranteed AIB group, has helped it snap up a number of corporate broker mandates over the past year, including Greencore, FBD, DCC, United Drug and Origin Enterprises.
But it stands alone among its main rivals, such as Davy and NCB, in not unveiling a voluntary redundancy scheme as a result of the downturn in recent years.
Goodbody's top brass, headed by managing director Roy Barrett, is understood to have broached AIB about the possibility of conducting a management buyout (MBO) of the broker in late 2006, following a €350m MBO deal at Davy from Bank of Ireland. AIB ruled out such a move at the time.
It is not known whether the broker's management would be interested in mounting an MBO bid in the event that the firm is put up for sale.