BoI should not need more government funding: Davy

BANK OF IRELAND refused to comment yesterday on whether or not it is planning a major rights issue in the coming months, nor on whether it may or may not need further state funding.

The non-response followed opinion from a leading stockbroking firm suggesting that the former point has potential, while the latter is not likely to be needed.

In a detailed research note on the bank, issued yesterday, Davy Stockbrokers said that the country’s

second largest bank should not need additional government funding and is “well placed” to conduct a €1.5 billion-plus rights issue later this year, which could go some way to paying off part of the Government’s €3.5bn investment and result in a lowering of the state’s indirect stake in the bank from 25% to just 7%.

“This would be a huge catalyst for the bank and leave the state with potentially only 7% of the stock,” the note said.

Davy also said that despite final legislation surrounding the formal opening of the National Asset Management Agency (NAMA) — the Government’s proposed “bad bank” project — now not due to be passed until September, the likelihood of Bank of Ireland requiring further Government support is very slim.

The Davy note added: “Political risks are a factor over the summer months. However, informed commentators believe that these will be most acute towards year-end — around the time of the next budget, when tough austerity measures need to be proposed. This should mean NAMA goes ‘live’, making the bad bank plan irreversible.”