Silverware will need to be sold to raise capital

AIB chief executive Colm Doherty says lack of clarity about NAMA and the lack of clearance from the EU on the bank’s restructuring made it difficult for him to be precise about how he saw the bank’s future evolving.

He said while the first phase of NAMA transfers is likely to start in mid-March the bank does not know the final discount it will face on the more than €23 billion in loans being transferred to the bad bank.

Mr Doherty said the bank has several issues to address as it faces into a difficult year. Up to €4bn in fresh capital has to be raised, according to estimates, but he refused to put a figure on the amount.

The bank is likely to have a Tier 1 ratio in place of 8% by 2012. Its current core Tier 1 ratio is 5%. And the new standards being demanded by markets will be higher.

Meanwhile, Mr Doherty said he has been told by the “bank’s shareholders”, essentially the Government, that it must set about raising capital under its own steam.

That effectively involves selling off some of the group’s silverware, not a good prospect in the depressed global banking market.

Mr Doherty confirmed a number of outside banks have shown interest in the group, but he refused to confirm who these are.

One stakeholder is prepared to buy into the bank but he was unable to say if the capital raising exercise and the sale of assets might involve the same bank.

On the issue of lending to business, Mr Doherty said the bank lent double the amount it was asked to last year. Finance Minister Brain Lenihan requested the bank make €1.3bn available in additional funding but AIB lent close to €2.5bn, he said.

SMEs have also left about €1bn in approved funding sitting in the bank’s vault, reflecting the depressed state of the economy.