Canadian minority stake ‘would ease AIB fears’

THE purchase of a minority stake in AIB by the Canadian Imperial Bank of Commerce (CIBC) would ease the threat of nationalisation hanging over the Irish bank.

If the deal goes through it means the Government would not be the “only potential investor” in AIB, according to an analysis by Bloxham Stockbrokers.

Such an outcome would be “positive” for the bank’s shareholders, said Kevin McConnell, head of research at Bloxham.

McConnell added the expression of interest might not be straight forward.

It has also been reported that CIBC is linked into the €10 billion loans on the books of the nationalised Anglo Irish Bank and that the chief executive, Gerald McCaughey led a delegation to meet Finance Minister Brian Lenihan some weeks back, when it is understood matters other than AIB were on the agenda.

Because of the wider nature of the talks McConnell described the visit “as very much an opener without specifics”.

Both AIB and CIBC have made it clear that any investment is contingent on NAMA being set up and on the bad debts of the bank, estimated at €30bn being transferred across.

That is far from certain as the Green Party prepares for a possible full debate among members on this increasingly controversial solution to the banking crisis.

Dan Boyle, the Green Party’s spokesman on finance, has called for a 50% discount on the €80-€90bn of the banks’ loans being transferred across to NAMA, not the 20% that is being widely talked about.

Richard Bruton, Fine Gael spokesman on finance, has also questioned the proposed 20% discount arguing it is far too generous and lets the banks away too lightly for mistakes of their own making.

That foreign banks are already looking to buy into our banks is clear proof that this deal is good for the Irish banks and very bad for the Irish taxpayer, he said.

Mr Bruton has agreed with the 50% figure demanded by Mr Boyle.

With AIB expected to transfer €30bn in bad loans to NAMA, a discount of just 20% saves it about €9bn and places that extra risk on the shoulders of taxpayers, a burden that could take decades to pay down, he said.

With the focus currently on CIBC research shows it has its own dark past. Apart from having had the disgraced publisher Conrad Black on its board for a number of years it was also caught up in Enron scandal in the US.

At present the deliberations surrounding NAMA will determine whether CIBC buys into AIB.