Bank says NAMA key to restoring confidence

AIB shareholders – who, yesterday, voted unanimously in favour of their bank participating in the National Asset Management Agency (NAMA) in the new year – have been told that selling assets to the Government’s “bad bank” project is a key step in restoring confidence to the company.

“We have considered the viability of alternatives to participation in NAMA. In its absence, the company would need to put in place additional term funding and raise further capital.

“Such capital would need to be put in place prior to mid-January when the application to participate in NAMA should be made.

“There are no viable alternatives for raising that capital and having committed funding in place in the necessary timeframe,” the bank’s executive chairman, Dan O’Connor told yesterday’s extraordinary general meeting at the group’s Dublin headquarters.

He added that NAMA would improve AIB’s liquidity levels and funding position and reduce its leverage by decreasing the level of loans it holds on its balance sheet. The transfer of AIB’s loans – the Government is set to pay around €17 billion in NAMA bonds for the loans, which have a total combined value of around €24.2bn – is set to commence next month and be completed by next July.

“The discount applicable to the company’s assets acquired by NAMA will not be known until such time as each loan has been individually valued by NAMA and that valuation has been served on the company by NAMA,” Mr O’Connor added.

Regarding the funding needed to balance AIB’s reserves after NAMA acquires its discounted bad debts, Mr O’Connor said that the level of capital requirement is still unknown, as are the issues of timing and how new funding will be phased in.

“Uncertainty remains about the levels of capital which banks will be required to hold in the future. However, it is our intention to raise additional capital within the next year.”

He added that the bank was aiming to raise capital through private sources – meaning retail and institutional investors. Although its share price was down by about 4c in early trading, AIB rallied well yesterday afternoon to close up 12c (nearly 10%) at €1.35.