Thursday 23 November 2017

AIB secures €3.1bn deal for Polish businesses

Price tag agreed with Santander exceeds analysts' expectations by €500m

A branch of Bank Zachodni WBK SA in Warsaw. Photo: Bloomberg
A branch of Bank Zachodni WBK SA in Warsaw. Photo: Bloomberg
Laura Noonan

Laura Noonan

AIB has agreed to sell its Polish businesses for €3.1bn, marking a major milestone in the bailed-out bank's bid to avoid majority state ownership.

The sale to Spanish banking giant Santander was announced last night, with the price tag outstripping some analysts' expectations by as much as €500m.

Speaking to the Irish Independent, AIB managing director Colm Doherty said the bank expected to announce further disposals "in the next couple of weeks".

The sell-off comes as AIB battles to improve its capital position by €7.4bn before the end of the year to satisfy demands from the Financial Regulator.

If the bank can't come up with the capital through asset sales and raising market capital, the gap will be plugged by state investment, raising the spectre of majority ownership by the State.

Last night's sale of the Polish assets will generate a capital boost of €2.5bn, with another €1.1bn expected from the sale of a 22pc stake in US bank M&T and €1.1bn from the sale of AIB's UK assets.

"I can't tell you as to what the end result will be in terms of the state shareholding, but I can tell you the management team is very focused on trying to minimise the State's contribution," Mr Doherty said.

He added that AIB had made a "tremendous" start to the sales process with the price it achieved for a 70pc stake in Poland's Bank Zachodni and a shareholding in Bank Zacho- dni's asset management arm.

Finance Minister Brian Lenihan welcomed the "successful sale" while analysts also praised above-expectation price, adding that the market was glad to finally have some news on the long-awaited disposal process.

Santander had been mooted as a potential buyer for all three of AIB's international arms, but Mr Doherty last night said that speculation to that effect was "uninformed" -- since doing the three deals at once would have been too complex.

He refused to rule out Santander as a potential bidder for the other assets, however.


"I'm not saying anything other than that there's a lot of interest," he said. "I expect to make announcements [on those disposals] in the next couple of weeks."

Poland's state-owned bank PKO had waged a very public campaign to secure Zachodni, insisting it was uniquely placed to offer AIB the speediest deal for its share.

Mr Doherty last night said any Zachodni deal would have to go through the same regulatory process.

In any case, the Financial Regulator has agreed to give AIB credit for disposals once they are agreed, rather than once they get regula- tory approval, Mr Doherty added.

Meanwhile, staff at the bank were yesterday told management would "not be in a position" to discuss staff cuts until the disposals were completed.

In an email to all staff, AIB's head of group human resources John Conway said he was "very aware of the impact of the uncertainty" on staff, adding that the position should be "clearer shortly".

Job cuts of between 1,000 to 2,000 have been speculated. At AIB's half-year results last month Mr Doherty refused to be drawn beyond saying the organisation would be "smaller" in the future.

Irish Independent

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