Tuesday 17 October 2017

Lenihan moves to take 16pc BoI stake

Investors face new hit as value of shares to tumble

Emmet Oliver and Joe Brennan

FINANCE Minister Brian Lenihan last night dramatically took a 16pc stake in Bank of Ireland in a move which will hit thousands of small investors.

It comes as a fresh blow to embattled investors, who have already seen the value of their shares tumble 93pc from an all-time high of €18.65 three years ago this weekend.

The bank's shares, trading at €1.26, are hovering around lows not seen since last May.

And it is feared the Government's new shares, combined with its rights to acquire a further 25pc stake in 2014, will put off potential investors as the group seeks to raise more than €1bn over the coming months.

"The markets will not like this news. The Government is getting its shares when they are trading at very low levels -- diluting investors way more than it even would have six months ago," a senior Dublin stockbroker told the Irish Independent.

Small investors own about half of the bank's shares, as a result of institutional shareholders fleeing the sector over the past two-and-a-half years as the financial crisis unfolded.

It is the first time the State has taken direct shares in either of the country's two main banks.

Up to now, investments were made via €3.5bn worth of preference shares, which come with a guaranteed dividend that ordinary shareholders are not entitled to.

Existing shareholders, who have seen the value of their stock almost wiped out, now find their stakes are being diluted by almost 16pc as the minister takes up his shareholding.

The Government is likely is increase its 16pc stake over the coming months.

Private investors are expected to pour money into the bank after the National Asset Management Agency (NAMA) starts taking over its toxic loans.

However, the bank last night issued a thinly veiled warning to the Government not to take too large a stake in case it might put off outside investors.



Warned

Any government stake should be at a level that "facilitates" private investors, it warned in a statement.

It is understood the Government has been planning to convert about €1bn of its €3.5bn investment into ordinary shares over the coming months as part of a larger recapitalisation package.

Bank of Ireland, the country's largest by market value, was due to pay the Government €250m in cash this weekend as part of the €3.5bn investment that taxpayers made in the bank last year.

But the EU Commission halted any cash payments until it has reviewed restructuring plans by Bank of Ireland and rival Allied Irish Banks (AIB).

If a bank cannot make the cash payment, it must transfer over €250m worth of shares instead to the State.

However, the National Treasury Management Agency (NTMA), which controls the state investment, last week said it preferred to wait for the cash and it was prepared to allow the bank several more weeks to facilitate this.

The Irish Independent yesterday revealed that under the bank's own rules the shares had to be paid over, regardless of the NTMA's position.

"This ensures that taxpayers are remunerated in a timely fashion for their investment in the bank," Mr Lenihan said last night.

It is hoped the EU will have delivered its verdict on the banks' restructuring plans before AIB is due to make its first dividend payment to the State in mid-May.

However, experts last night warned that if Bank of Ireland is successful in the coming months at raising cash from its own shareholders, it will then water down the 16pc stake the State has now taken as well as the 40pc it is due to take in 2014.

Irish Independent

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