AIB outvalued €1.3bn by its foreign holdings

ALLIED Irish Bank’s major holdings in a US and Polish bank are worth a staggering €1.3 billion more than the current €485 million value of AIB on the Irish Stock Exchange.

The massive fall in the value of Irish bank shares has pushed the value of AIB to record low prices which means that investors are, in effect, placing a negative value on the worth of AIB’s Irish and British operations.

The bizarre pricing of AIB shares by investors puts a value of €485m on AIB.

Yet, AIB’s 24.2% holding in M&T Bank in the US is worth €735m, despite a massive fall in the US bank’s share price. And AIB’s 70.4% stake in Warsaw quoted Bank Zachodni WBK SA is worth €1,075m, even as its shares too hit record lows.

The combined value of AIB’s holdings in M&T Bank and Bank Zachodni comes to €1.81bn — €1.32bn more than the banks’ current value on the Irish Stock Exchange.

An analyst at Deutsche Bank AG in Warsaw, Marcin Jablczynski, said: “It’s hard to put a value at all on AIB’s equity. The market is afraid nobody’s doing anything to prevent the Irish banks from being nationalised.”

And a spokesman for the Polish bank, Piotr Gajdzinski, said AIB will keep its stake in Bank Zachodni, calling a report of a planned sale in Polish newspaper Parkiet as “completely untrue”.

“We have our owner’s assurances that we won’t be sold,” Mr Gajdzinski said.

The Governor of the Central Bank, John Hurley, who is also a member of the European Central Bank’s Governing Council, said the weak share prices of AIB and Bank of Ireland do not reflect their strong fundamentals.

Mr Hurley said AIB and Bank of Ireland have faced “a great deal of pressure in recent times”. They are “very strong institutions” and are “vital for the Irish economy”.

Mr Hurley added that so far as AIB and BoI are concerned, the Government has reiterated that it sees these banks as central to the Irish financial system and essential to the proper functioning of the economy.

“It has also indicated its intention that both banks remain as independent banks in private ownership and has stated it is proceeding with the planned recapitalisation of both banks,” he added.