Saturday 18 November 2017

Doherty's resignation paves way for sale of M&T stake

COLM Doherty's resignation from the board of US bank M&T means that a sale of AIB's 23.5 per cent stake, probably to Spanish bank Santander, is now imminent.

Santander, which already owns Philadelphia-based thrift Sovereign, will have to pay at least €1.8bn for AIB's shareholding in the 28th largest US bank.

On Wednesday, AIB announced that Mr Doherty, its managing director, was resigning as a director of M&T, the Buffalo-based bank in which AIB has had a 23.5 per cent stake since 2002. The announcement intensified speculation that AIB was about to offload its M&T shareholding.

The most likely buyer for the AIB stake is Santander. It is understood to have already discussed a possible merger between Sovereign and M&T but the talks broke down over the issue of control. However, Santander is now understood to have its eyes on the AIB shareholding.

This is good news for AIB as Santander's interest has pushed up the M&T share price to $89, almost twice the $45 level at which the shares were trading a year ago. At the current share price, AIB's stake is worth $2.21bn (€1.8bn).

With the Financial Regulator demanding that AIB raise €7.4bn of fresh capital by the end of the year, this will still be nowhere near enough to plug the hole in its balance sheet. However, it's still almost twice as much as a sale of the stake would have yielded a year ago.

Events are also progressing nicely in Poland where AIB is seeking buyers for its 70.4 per cent stake in BZWBK. At the current PLN196 share price, AIB's shareholding is worth about €2.47bn. There is plenty of interest with SocGen and BNP Paribas reputedly heading the queue.

There is unfortunately one potential fly in the ointment. Last week, Polish Treasury Minister Aleksander Grad said in an interview that it would be "greatly appreciated" if a Polish buyer could be found for BZWBK. This could drive down the price AIB would receive for its stake.

Even if the Polish sale goes according to plan, the most that AIB could hope to raise from selling its M&T and BZWBK stakes is about €4.2bn. That still leaves it more than €3bn short on its capital requirements.

With the effective State shareholding in AIB, including warrants, already up to almost 39 per cent and zero goodwill for the bank in official circles, this makes it virtually impossible for AIB to stay out of State ownership and for Doherty to keep his job.

Sunday Independent

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