Monday 25 September 2017

Staving off majority state shareholding is huge coup for country's biggest bank

Managing director: Colm Doherty
Capital required: €7.4bn of equity
Loans going to NAMA: €23bn
Discount on first NAMA loans: 43pc

Joe Brennan

ALLIED Irish Banks pulled off a major coup yesterday by persuading the Government to give it until the end of the year to flog all its main foreign assets and launch a massive share sale -- before going back cap-in-hand to the taxpayer.

But Finance Minister Brian Lenihan said that it was still "probable" that the State will end up with a majority shareholding.

The new head of financial regulation, Matthew Elderfield, confirmed that AIB will need to raise €7.4bn of equity by the end of this year to hit his new capital targets.

The hard-fought victory for AIB followed a weekend of crisis talks between the country's largest bank and the Department of Finance.

After Mr Lenihan finished his speech, AIB boss Colm Doherty issued a statement to the market saying the group is to sell its UK business, 70.2pc-owned Polish division Bank Zachodni WBK and 23pc stake in US bank M&T.

NCB Stockbrokers analyst Ciaran Callaghan estimated last night that AIB could generate €1bn from the sale of the US stake, a further €2bn for the Polish unit and up to €1bn for its British assets.

Buyers

However, another senior analyst said that the figure could come in below this. "After all, the bank will automatically be seen by potential buyers as a distressed seller," he said.

Still, AIB got a slight head-start last week by raising €445m through a complicated restructuring of some of its riskier bonds. It also signalled its intention to launch a stock sale to existing shareholders by the end of the year. If, as expected, the bank ends up going back to the Government, it is likely that its €3.5bn investment in AIB will be converted into direct shares in the first instance.

The much-higher-than-expected amount that AIB is being forced to raise is driven by the fact that it has had to stomach a 43pc discount on the first €3.29bn of loans it is transferring to NAMA.

In addition, a major stress test carried out by the regulator on all the bank's non-NAMA loans show that AIB's remaining €12bn of property and development loans aren't in too great shape either.

Irish Independent

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