Regulator tells IL&P just €145m will cover demands
Bancassurer given until May to raise funds after stress test
Published 11/09/2010 | 05:00
IRISH Life & Permanent (IL&P) must raise just €145m to meet the demands of the Financial Regulator's stress tests, a starkly lower amount than the billions other major banks were required to raise.
IL&P's fundraising number was revealed by the Financial Regulator last night, after a lengthy examination of the bancassurer's ability to withstand various adverse stresses.
The review also revealed that IL&P would need just €925m of additional capital to fund plans to strip out its banking arm, against market expectations of about €1bn.
AIB and Bank of Ireland went through the same tests back in March and were mandated to raise €7.4bn and €2.7bn respectively by the end of the year.
"That's a good result in fairness," an analyst said last night of IL&P's performance, adding that there was "always a fear that something negative" could emerge from the exercise.
In a statement, IL&P chief executive Kevin Murphy "welcomed" the results, adding that they confirmed "the robust capital strength of the group".
IL&P has been given until May to raise the extra €145m. Mr Murphy said the funds would come from a planned securitisation and "other non-banking subsidiaries".
The bancassurer already has €1.3bn in debt to renew by the end of the year and has said it may raise an extra €1.5bn from the market if conditions were benign.
The detail of the regulator's stress tests show that, in the adverse scenario model, IL&P would have a "buffer" of €169m of Tier 1 capital at the end of December 2011.
The need for an extra €145m arose because IL&P's Core Tier 1 capital, a purer form of equity, slipped below the level demanded by the regulator in the "stress case" scenario.
The stress test results come a week after IL&P told investors it was on the "road to recovery" after first-half losses narrowed from €220m in 2009 to €32m last year.
IL&P is awaiting news on its bid to takeover state-owned building society EBS and also listed five other potential acquisitions in its half-year results presentation.
"The first six months give us a very strong platform [for future growth]," Mr Murphy told analysts, describing the half-year performance as "very satisfactory".