Taxpayers get a break as investors buy $1bn Bank of Ireland shares
Published 25/07/2011 | 10:41
Bank of Ireland has escaped majority state ownership after a group of investors agreed to buy more than €1bn in shares.
This will mean substantical savings for the hard-pressed taxpayer.
Finance Minister Michael Noonan said the Government negotiated the deal, which he described as a major step in its plans to radically restructure the banking system.
Subject to appropriate regulatory clearances, the investors have committed to buy up to $1.123bn of the State's shares in Bank of Ireland, cutting the amount the Government has to fork out to capitalise the troubled-institution.
Mr Noonan said: "The commitment by a number of significant private sector investors to invest side by side with the State's retained holding without any form of additional risk sharing by the State reaffirms the credibility of our stress tests and the health of our banks after the PCAR exercise.
"After taking into consideration shares already held by private investors, this transaction will result in a minimum private sector ownership of 68pc in Bank of Ireland.
"This investment is tangible proof of growing international confidence in the future prospects of both Bank of Ireland and the Irish economy."
The investors will initially purchase on an unconditional basis €241m of the State's shareholding, with a commitment to purchase up to another €882m worth. The State will continue to hold a minimum shareholding of 15pc with a maximum of 32%.
Mr Noonan said the deal - and recent successful cut of Ireland's interest rate on its EU bailout - was another very positive development for the Irish economy.
In a statement, the Governor and company of the Bank of Ireland said: "The bank is very pleased to see this major endorsement of the bank's strategy and the confidence which these investors share with the bank in the future for the Irish economy.
"The bank very much appreciates the opportunity which the minister has provided to the bank to seek private capital sources to support its capital-raising programme and to enable its existing stockholders to participate in the rights issue component of the capital-raising programme," it added.
Elsewhere AIB reported an underlying loss of €2.6bn for the first six months of the year.
The financial institution revealed there was a fall in customer deposits, with loans and receivables to customers down.
However its interim results also revealed AIB made a profit of €2.2bn from the sale of its share in Polish bank Zachodni, and capital initiatives taken in.