Sunday 4 December 2016

IL&P stock plunges 14pc as fears grow over possible state bailout

Published 27/11/2010 | 05:00

IRISH Life & Permanent (IL&P) believes it can meet new regulatory capital targets without any bailout from the State, but is actively reviewing its bid to buy EBS.

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The news comes as IL&P's stock plunged another 14pc yesterday amid fears shareholders could be massively diluted by an injection of state cash.

Reports earlier in the week suggested IL&P could need €600m in additional capital to satisfy new demands to be unveiled this weekend. Sources last night said, however, that IL&P only needed another €120m.

The figure is lower because IL&P has already sourced enough money to get to a 10pc tier one capital ratio, putting it ahead of the other banks' 8pc. The new target is expected to be 12pc.

IL&P believes it can raise the extra €120m from its own resources and does not expect to have to cede any stake in the plc to the State. The position is expected to be confirmed by the bailout announcement tomorrow night.

Fluid

Market sources stressed that the situation remained fluid, so IL&P could not make any statement to investors. Shares fell to a record low of 48c yesterday before closing at 51.4c.

Despite believing it doesn't need a bailout, IL&P is understood to be reviewing its bid for building society EBS in light of the difficult funding environment.

IL&P's bid for EBS involves raising the €925m wanted to hive off its banking subsidiary Permanent TSB and merge that with EBS. The new banking entity would have to be capitalised with €925m, a target viewed by the market as "challenging" in the current environment.

IL&P is now examining keeping the bank within the overall group, so no additional capital would be needed. The plc is also believed to be considering "focusing on its strengths" and pulling out of the bid.

Final bids for EBS are due in by December 22. The other remaining bidder is a consortium including Dublin-based Cardinal, US investor Wilbur Ross and US fund Carlyle.

Irish Independent

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