Saturday 16 December 2017

Staving off majority state shareholding is huge coup for country's biggest bank

Managing director: Colm Doherty
Capital required: €7.4bn of equity
Loans going to NAMA: €23bn
Discount on first NAMA loans: 43pc

Joe Brennan

ALLIED Irish Banks pulled off a major coup yesterday by persuading the Government to give it until the end of the year to flog all its main foreign assets and launch a massive share sale -- before going back cap-in-hand to the taxpayer.

But Finance Minister Brian Lenihan said that it was still "probable" that the State will end up with a majority shareholding.

The new head of financial regulation, Matthew Elderfield, confirmed that AIB will need to raise €7.4bn of equity by the end of this year to hit his new capital targets.

The hard-fought victory for AIB followed a weekend of crisis talks between the country's largest bank and the Department of Finance.

After Mr Lenihan finished his speech, AIB boss Colm Doherty issued a statement to the market saying the group is to sell its UK business, 70.2pc-owned Polish division Bank Zachodni WBK and 23pc stake in US bank M&T.

NCB Stockbrokers analyst Ciaran Callaghan estimated last night that AIB could generate €1bn from the sale of the US stake, a further €2bn for the Polish unit and up to €1bn for its British assets.


However, another senior analyst said that the figure could come in below this. "After all, the bank will automatically be seen by potential buyers as a distressed seller," he said.

Still, AIB got a slight head-start last week by raising €445m through a complicated restructuring of some of its riskier bonds. It also signalled its intention to launch a stock sale to existing shareholders by the end of the year. If, as expected, the bank ends up going back to the Government, it is likely that its €3.5bn investment in AIB will be converted into direct shares in the first instance.

The much-higher-than-expected amount that AIB is being forced to raise is driven by the fact that it has had to stomach a 43pc discount on the first €3.29bn of loans it is transferring to NAMA.

In addition, a major stress test carried out by the regulator on all the bank's non-NAMA loans show that AIB's remaining €12bn of property and development loans aren't in too great shape either.

Irish Independent

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