AIB may have to raise more than €7bn

AS the final cost of the Anglo Irish Bank bailout is set to be revealed later today AIB has been warned it may have to raise more than the original figure of €7.4 billion in fresh funding to strengthen its capital base.

The Financial Regulator is investigating whether the bank will need to find extra capital beyond the sum identified last March due to potentially higher losses on loans transferring to NAMA, the bad bank.

Bloomberg reported yesterday the bank could need further capital injections due to higher discounts on loans it’s sending across to NAMA.

Market sources yesterday reported strong interest in Bank of Ireland shares.

The bank, which has raised €2.9bn in fresh capital, needs no further funding, the regulator has decided.

Interest in the group’s shares is thought to have emerged from a US investment group called Harris.

Reports that financier Dermot Desmond and investor JP McManus were also buying shares in the bank could not be confirmed.

Meanwhile, with the final tally on the cost of Anglo Irish due to be published later this afternoon the Government is hoping that the figures will calm investor nerves and ease the cost of fund-raising to the state.

Since August, when fresh focus was put on the cost of the Anglo bail-out, markets have punished Ireland by pushing the cost of 10-year bonds up close to 7%.

At this stage the final figure in a worst case scenario it understood to be over €30bn.

Rating agency Standard & Poor’s said the gross cost could be over €35bn but one senior economist said providing clarity on the total cost was more important at this stage to steady markets.

If they get that “I don’t think there will be a whole lot of (negative) reaction” to the figures, said Dermot O’Leary, chief economist at Goodbody Stockbrokers.

It will be important also the markets understand “how they got to that estimate,” Mr O’Leary said.

Press reports indicate that the Government’s base case for the total cost to the state of Anglo will be €28bn-€29bn, with a higher cost in a “stressed” scenario.

Markets are likely to take the higher estimate as a base case, he said.

This is an enormous amount of money but economists have argued this is a one-off cost the country can actually deal with.

“Whether the debt level at the end of 2014 is 105% of GDP or 111% of GDP does not change the underlying argument that Ireland’s position is sustainable as long as it can bring about the required budget consolidation over the next few years,” said Mr O’Leary.

In a separate development Finance Minister Brian Lenihan has appointed five members to the Central Bank Commission.

The ESRI’s Professor John Fitzgerald will serve a five-year term as will banking expert Max Watson

Former Bank of Ireland chief executive Mike Soden and former SIPTU president Des Geraghty will serve on the commission for four years. UDC Professor Blanaid Clarke will be on the commission for three years.


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