AIB looking down the barrel of majority state ownership
EIGHTEEN months after the original banking guarantee, the Government has finally grown tired waiting for the country's banks to recapitalise themselves.
The new sheriff in town on the financial regulatory front, Matthew Elderfield, has also upset the apple cart by demanding that the banks hit higher capital targets much more quickly than had been expected.
It has been impossible up until this point for a bank to launch a 'rights issue' share sale -- as clarity over NAMA 'haircuts' and the financial watchdog's new capital requirements is only emerging now.
As AIB faces the dire possibility of ending up with majority state ownership, questions will be asked as to whether earlier action could have avoided something neither the bank nor the Government wanted.
Granted, resurgent asset prices in recent months mean that the AIB could now generate more for its stake in US bank M&T, UK business banking arm and -- at a push -- its 70pc-owned Polish unit Bank Zachodni WBK than it would have done late last year. But everyone may have run out of time instead.
AIB boss Colm Doherty laid out his stall clearly earlier this month, as AIB unveiled full-year loss of €2.6bn.
Foreign assets would be flogged in the first instance, before the bank approached shareholders for cash. Going back to the State was the last resort.
It is a plan that captured the confidence of investors -- with the shares shooting up 70pc in the space of four weeks to €1.70.
Sentiment had also been helped as a subordinated bond restructuring, completed last week, brought in €445m of much-needed equity.
It is hard not to think that the protracted war between AIB and the Government over the appointment of Colm Doherty may have contributed to the country's biggest bank actually looking down the barrel of state control.