BoI shareholders back fundraising plan
BANK of Ireland chairman Pat Molloy revealed yesterday that the group did not have an agreement on how the Government would eventually go about selling down the 36pc stake it is taking in the lender.
Speaking at an extraordinary general meeting to approve the bank's €3.56bn capital raising, Mr Molloy said: "It's very much our ambition that the Government will come out of this investment handsomely.
"The timing of that is a matter for the National Pensions Reserve Fund Commission. There is no pre-arrangement in that respect."
Shareholders voted by a majority of at least 98.5pc on all eight resolutions, paving the way for the hugely complex fundraising deal. The aim is to raise cash to plug the hole in the bank's balance sheet, following the discounted sale of NAMA loans, and make sure that it has enough capital to hit new regulatory targets.
The meeting approved the Government's conversion of €1bn of its €3.5bn of preference shares into ordinary stock and the recent placing of €500m of BoI stock with a group of institutional investors.
Shareholders also gave the go-ahead for a €1.7bn rights issue share sale within the next three weeks -- €630m of which is coming from the State through the National Pension Reserve Fund (NPRF). As a result of the whole transaction, existing shareholders will end up owning 48pc of the bank.
As expected, a number of disgruntled shareholders vented their anger at the fact that BoI is restricted by the European Commission from paying dividends again before September 2012, unless the State manages to offload its remaining €1.9bn of preference shares in the meantime.
BoI chief executive Richie Boucher ruled out, when asked, the setting up a special loan scheme for customers to buy shares -- or allowing stock in the group to be used as collateral to borrow in order to participate in the rights issue.
"As a matter of policy, we don't take single shares as security," he said. "We will assess repayment capacity, but we don't have a special loan scheme for shares."
Mr Molloy reiterated that the board believed its non-NAMA impairment charges had peaked and that they should come to €4.7bn over the worst three years of the downturn.
The bank has set out a number of financial targets it plans to reach by 2013.
These include the rebuilding of its net interest margin -- the difference between the rates at which it funds itself and lends to customers -- to 1.75pc, from a low of 1.59pc last year.
BoI also aims to cut its cost-income ratio below 50pc and pull the loan-to-deposits ratio back below 125pc.
"If we meet these financial targets, this should allow us to deliver a return on equity in the low teens to mid teens percent in 2013 and restore shareholder value to you, our stockholders," Mr Molloy said.
The chairman assured shareholders that he "will be looking at this (management) team to address costs in every way it can be done" without damaging the group.
The group's costs dropped 11pc in the nine months to the end of last December, helped by the natural attrition of staff.
Mr Boucher clearly signalled that the group was positioning itself for a withdrawal of state banking guarantees from September.