AIB chief says bank does not need capital from Government or private equity houses

AIB yesterday reiterated its claim that it is not in need of rescue capital from the Government or private equity houses.

When questioned before the Joint Committee on Finance and the Public Service at Leinster House, AIB managing director, Donal Forde said: “Not all banks are the same. We don’t feel we need capital and any extra capital won’t do anything for our business. We have no constraints on our business lending levels. It may not be the same for all Irish banks, but it’s for others to speak for themselves.”

This week started with the Government announcing a plan to link up with private investors to recapitalise the Irish banking sector by 10bn. AIB has long since said it would be capable of raising capital through the sale of assets, while Bank of Ireland has seemed split between raising capital via private equity investment and a Government aid scheme.

At yesterday’s Oireachtas Committee hearing, Bank of Ireland’s head of retail banking, Richie Boucher, said any potential investment into specific banks would depend on the exact terms of the offer, what extent private investors were willing to buy into the strategic direction of the banks and what their investment horizons were like.

Both banks saw their share prices suffer yesterday. AIB was down by 3.55% at €1.90, while Bank of Ireland fell by 6.12% to close at 92c.

Bank recapitalisation was also touched upon by JJ Killian, the chairman of small firms’ lobby group, ISME. “We’re hearing the same old mantra from the banks; that they’re open for business. But that contrasts completely with anecdotal evidence we’ve received from our members. Literally thousands of small firms are finding it very difficult to get credit from banks.

“Now the recapitalisation issue seems like it might enter months of negotiations, which is of no help to the small firms sector as it can’t wait months. These firms need flexibility and common sense now.”

Yesterday AIB said it was making further changes to its lending and deposit rates following the recent ECB interest rate cut. Overdraft rates for business customers are being cut by the full 0.75% and for personal customers by 0.25%. The standard variable rate for owner occupier mortgage holders is also being decreased by 0.75%.