AIB confirms overseas bank approach

ALLIED Irish Banks confirmed yesterday that it has been approached about the possible sale of a minority stake to an overseas bank, understood to be the Canadian Imperial Bank of Commerce (CIBC).

CIBC is one of Canada’s biggest banks, employing 40,000 staff at more than 1,000 branches.

CIBC told RTÉ last night that “it did not comment on market rumour and speculation”.

Such a deal could rule out the threat of nationalisation and make it easier for the bank to raise funds down the line, said Kevin McConnell, head of research at Bloxham Stockbrokers.

Buying a sake in an Irish bank could be of interest to a number of banks in North America given the Irish bank’s stake in the US-based M&T, which has performed well during the downturn.

News of the bid at this stage in the NAMA process has surprised many and sends a clear signal that the Irish banks will become attractive targets once their bad debts have been taken over by the taxpayer.

A deal will only take place after NAMA has been set up and would have to have full government backing.

AIB is 25% owned by the taxpayer and is also under state guarantee.

It initially refused to comment but was forced to issue a statement after its shares rose sharply in Dublin.

It said the approach could lead to a “minority stake” in the bank, adding that discussions were “preliminary”.

“There can be no certainty that these discussions will lead to a proposal to invest in the group or a transaction being concluded,” it said.

This view was shared by Mr McConnell who said the approach, which was made to the Department of Finance by the Canadian bank, was “very speculative”.

Shares in the bank were up over 7% in late trading yesterday, having gained 15 cents to €2.25.

Arch rival Bank of Ireland’s shares were also boosted by the reports and rose 2.7% to €2.12.

Canadian analysts have identified the Irish banking sector as a good investment vehicle once their balance sheets have been cleaned up.

Canada’s banks are among the strongest in the world and it is the only G7 member whose banks survived the global credit crunch intact.

Canadian banks have strong retail operations with substantial deposit bases and they have been conservative in their lending policies.

Fine Gael finance spokesman Richard Bruton reacted strongly to reports of stake-building in AIB.

Foreign banks will chase a “quick profit” from Irish banks while the taxpayer “foots the bill”, he said.

“Who wouldn’t be interested in buying a cleaned-up bank at rock bottom prices?

“This is especially the case as the cost of cleaning up will be paid by the taxpayer and a sugar-daddy state.

“The Government now needs to clarify whether it has given any indication to potential investors in Irish banks on the likely write- offs that the banks will have to take when transferring toxic loans to NAMA, and the extent of the taxpayer bailout,” he said.

AIB is rumoured to be placing €30bn of bad loans that will be discounted by 20%. Mr Bruton said the discount should be 50%, ensuring taxpayers are exposed to €9bn less of the bad debt risk and the bank takes more responsibility.