AIB to tap shareholders and State for billions in September
Allied Irish Banks' chairman told shareholders yesterday the group will be going cap-in-hand to them and the State in September to fill the multi- billion euro gap between proceeds of assets sales and the €7.4bn it must raise by the end of the year.
Analysts estimate the bank will be able to generate about €4.5bn of capital from the sales of its Polish and UK divisions, as well as its 22.5pc stake in US regional bank M&T.
Dan O'Connor told the group's annual general meeting that "it kills me to sell" the Polish unit, but warned investors the State would be left picking up the bill if AIB does not raise billions of euro through disposals.
"What that'll effectively do is wipe out all shareholders," Mr O'Connor said. He added that asset sales are also part of the "burden-sharing" that Brussels is demanding of bailed-out banks across Europe, rather than over-reliance on taxpayers.
About a dozen IBOA finance union members at AIB's First Trust Bank, part of the UK division, staged a protest outside the AGM. IBOA general secretary Larry Broderick asked the board during the meeting to change its stance on the UK sale.
"Given the depressed markets' conditions, it is questionable as to whether a buyer will be found to pay anything like the full economic value of these businesses," Mr Broderick said. "The more prudent course would be retain the two businesses so that they can contribute to the long-term health of AIB."
However, Mr O' Connor said: "The decisions facing us are very, very stark. There is no choice in this any more. The EU requires us to shrink this bank."
The chairman said the timing of share sale "will be around September". He indicated that the bank would seek to carry out a deal similar to the one unveiled by rival Bank of Ireland on Monday.
This consists of a €500m placement with large institutions, a €1.6bn rights issue, €1.7bn investment by the State by way of converting some of its preference shares into bonds and a debt-for-equity swap, set to raise up to €300m.
AIB is sending about €23bn of risky property loans to NAMA this year, making it the second-largest participant in the scheme. It has had to stomach a 42pc discount on the first tranche of loans to the 'bad bank'.
Shareholders used the occasion to again vent their anger at AIB lending out tens of billions to the property sector as the boom roared to a peak.
"You got greedier and greedier," said Mary Fitzgerald, a small shareholder. "You just wanted to be the same as Anglo Irish (Bank)."
Mr O'Connor admitted: "This bank got distracted by property lending. It was too easy."
He also said that the stress-tests that the bank had applied to its property portfolios during much of the crisis "were absolutely wrong".
AIB's board is meeting today to finalise a capital-raising plan for the head of financial regulation, Matthew Elderfield, who is insisting that all Irish banks have equity reserves on their balance sheets by the end of this year equivalent to 7pc of assets.
AIB has been given until tomorrow to file the plan.
"There is nobody on this podium (at the agm) that is proud of where we are," Mr O'Connor said. "The job I've been asked to do is to fix the bank, and it will be fixed."
But the chairman sent out a clear signal to potential buyers of the foreign assets that "it is not going to be a fire sale".
Mr O'Connor said "there have been many, many expressions of interest" in AIB's 70.2pc-owned Polish unit Bank Zachodni WBK, while its M&T stake has also attracted a lot of interest.