AIB: No plan to sell foreign interests to raise money

AIB’s outgoing chief executive has poured cold water on the bank simply selling off overseas divisions in order to raise further funds for the group.

Addressing the Joint Oireachtas Committee on Finance and Public Service, Eugene Sheehy, who is due to stand down from his role as AIB chief at the end of this month, said that there was “no particular opportunity” to close down any one business and “pump money” back into the Irish operations.

AIB has said relatively recently that it intends to raise around €2 billion in fresh capital in the next year and a half, adding that this could be achieved through a number of options.

The bank has remained tight lipped over the potential of selling its 70% stake in Polish bank Bank Zachodni WBK and its 25% stake in US bank, M&T, although the latter sale has seemed more likely of late.

However, Mr Sheehy suggested it would be “the wrong thing to do” to withdraw from Poland, an operation which he said is providing liquidity for the overall group.

Meanwhile, AIB’s new temporary executive chairman, Dan O’Connor, confirmed that the bank would be sending out a circular to shareholders “imminently” with regard to its intended participation in the National Asset Management Agency (NAMA).

Both AIB and Bank of Ireland have a window of 60 days, from the formal establishment of NAMA, to hold shareholder votes on their individual participation in the new project.

On the subject of NAMA, Mr Sheehy told the committee that the new body “is expected to have a positive effect on the cost of funding to AIB over time”.

“Already, there is evidence that international providers of funds to Ireland have taken a positive view of the NAMA proposal,” he added.

He also said that the quality of AIB’s balance sheet would be “vastly improved” post-NAMA.

However, he hesitated before admitting that the bank “will consider” trading the expected €16bn-€17bn in bonds it will get from NAMA in exchange for its transferred loans for additional loans from the European Central Bank (ECB).

Currently, around 6% — or €10bn in monetary terms — of AIB’s balance sheet is made up of ECB loans.

Mr Sheehy said it would be the bank’s aim to keep the ECB loan level low.

The bank added that it does not foresee the need to receive further money from the Government after it transfers loans to NAMA.

The bank also said it has adequate lending capacity.

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