Sunday 4 December 2016

Majority of investors in lenders view state control as 'negative'

Joe Brennan

Published 27/02/2010 | 05:00

MORE than 60pc of investors feel the Government taking a majority stake in the two top banks would negatively impact their decision to support expected 'rights issues' equity raising by both during the coming months, according to a survey by Bloxham.

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Still, the survey suggested that most institutional investors had priced in the prospect of the State ending up with a controlling stake in Allied Irish Banks (AIB), with 53.3pc of those polled saying it would have no impact on their decision to invest further.

But 52.9pc of institutional investors said their decision to invest in Bank of Ireland (BoI) would be negatively affected if the taxpayer took a majority holding in the group.

The Government had to take a 15.7pc stake in BoI this week in lieu of a cash dividend on its €3.5bn of preference shares in the bank -- as Brussels has banned interest payments on certain securities as it assesses the group's restructuring plan.

Dilemma

AIB faces a similar dilemma in mid-May, but it is hoped the European Commission will have delivered its verdict on both groups' viability plans by then.

However, the survey showed that 58pc of institutional investors in BoI and 60pc of such shareholders in AIB would welcome a partial conversion of the State's preference shares in each into ordinary shares as part of an overall recapitalisation package.

Some 85.7pc of institutional shareholders and 65.2pc of retail shareholders would support a rights issue by BoI.

At AIB, 76.5pc of institutional shareholders and 66.5pc of retail investors would back a rights issue.

Kevin McConnell, head of research at Bloxham, said this suggested AIB may need to take a number of initial steps -- such as asset sales -- to raise capital before going out cap-in-hand to shareholders for equity.

Bloxham polled 40 institutional investors and about 450 retail shareholders. More than 80pc said they felt the establishment of the National Asset Management Agency had improved sentiment toward the economy.

Irish Independent

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