AIB sale of US bank by month end

AIB is expected to conclude the €1.2 billion sale of its 23% stake in US institution, M&T Bank, by the end of this month.

The sale of the asset – probably to Spanish banking group Santander, which has already agreed to pay just over €3bn for AIB’s Polish interests – would leave the bank with a target of around €3.5bn to raise in a rights issue, later in the year, as it bids to meet its end-of-December €7.4bn group fundraising target.

Bloxham Stockbrokers said yesterday that it met AIB management on Tuesday, after which it formed the conclusion that “the sale of an asset by the end of September” is likely.

It added that “further smaller sales” could net the group up to €400 million in added capital.

“This would allow AIB to progress with its plans to raise a maximum of €3.5bn in the market, with the Government having already pledged to provide up to that figure should it be required,” the stockbroking firm added.

AIB – which declined to comment on the progress of its ongoing overseas asset disposal programme yesterday – said, at the beginning of this year, that it was likely to launch a rights issue near September.

Timescales have long since been amended and the bank is now looking at some time in the fourth quarter of the year and is only likely to update on the matter when the bulk of its disposal programme is complete.

Given that M&T (the second largest of its disposals) is now expected to be gone in the next week, or so, more clarity is likely at the beginning of next month.

The price it manages to get for its British-based assets will, ultimately, govern how much AIB ends up looking for when it goes to the markets, in a bid to keep state ownership levels to a minimum.

In the US, Santander and M&T are understood to be in negotiations with the Federal Reserve over a deal which could give the Spanish bank an initial minority stake in M&T, but the added option of acquiring a majority stake at a later date.

The initial minority stake would largely be made up of AIB’s existing shareholding.

The Irish bank’s share price fell by nearly 6%, yesterday, to 60 cent.