Friday 15 December 2017

AIB expects 'significant progress' in shoring up its balance sheet

Joe Brennan

Colm Doherty, managing director of Allied Irish Banks, told staff yesterday he expects to have made "significant progress in the coming months" on the group's plans to raise capital to shore up the loss-making balance sheet.

In the first staff update on his 1,000-day plan to overhaul the group, Mr Doherty said: "We have now moved beyond the point of developing initiatives and the implementation of the capital plan is under way."

AIB is believed to be awaiting the green light from the Financial Regulator to launch a debt restructuring -- involving its so-called lower tier 2 bonds -- which is expected to raise €300m-€350m of capital.

It would mark the first of a series of equity-raising measures for the bank, which analysts estimate will have to raise in excess of €4bn to bolster its reserves.

The actual amount will be determined by the watchdog in the coming weeks, as it concludes a 'stress test' review of the banks' post-NAMA loan books.

Meanwhile, European banking behemoths Societe Generale, BNP Paribas and Rabobank were mooted yesterday to be among potential buyers for AIB's Polish unit Bank Zachodni WBK, according to local daily 'Parkiet'.

AIB described the report as "speculation" and reiterated that "all assets are being looked at, but no decision has been made".


Mr Doherty, who last week unveiled an annual €2.3bn net loss for the group as it wrote down €5.3bn of impaired loans, has described Bank Zachodni at the time as "the jewel in the crown" of the group.

Observers expect AIB will initially try to dispose of its 23.5pc stake in US associate M&T Bank and possibly its UK business banking operations. Meanwhile, the European Commission is expected to return a verdict on AIB's state-aid restructuring plan by the end of this month.

Some analysts fear that Brussels may force AIB to sell Bank Zachodni, even if the group believes that keeping the profitable unit would have a better chance of attracting a strategic investor or getting a 'rights issue' off the ground.

Mr Doherty has also asked staff for "patience for a while longer" as speculation continues to swirl about asset sales and job cuts at the group.

"If I were in a position to put an end to the uncertainty now, I would, but there are a number of actions to be taken and decisions to be made before I reach that point," he said.

He added: "These relate to NAMA, the EU response to the restructuring plan and the capital threshold we were required to hold by the regulator."

While most of Mr Doherty's management team has been appointed, he said the new group chief risk officer still has to be named and vetted by the financial watchdog.

"All members of the management team are now fully engaged in delivering the objectives for their individual areas and are working together towards the overarching goal of restoring AIB's viability and credibility," he said.

Irish Independent

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