AIB to raise €1.5bn with sale of M&T stake at 7% discount

AIB is to sell its 22.4% stake in M&T for €1.5bn, a discount of 7% to Tuesday’s value of the bank’s stake holding in the US regional bank.

The disposal is expected to generate €0.9bn to boost AIB’s capital fund raising, while the rest of the cash will be used as an additional source of liquidity to support its business activities, the bank said in a statement.

AIB has already raised €2.5bn from the sale of its Polish banking subsidiary to Bank Santander for €2.5bn.

Ciaran Callaghan of NCB Stockbrokers said the price achieved was “slightly disappointing when compared to previous estimates”.

On the plus side, the sale has ended the uncertainty surrounding the minority stake and was to be “welcomed,” he said.

The placing of the shares was forced on AIB after Santander, which previously paid €2.5bn for AIB’s Polish subsidiary, pulled out of talks. AIB has raised €3.4bn from the sale of foreign assets, including the Polish subsidiary BZWBK, and now M&T, leaving the bank still facing a capital shortfall of about €7bn to be addressed before the year end.

The bank is to hold an extraordinary general meeting on November 1 to look for shareholder approval for the sale.

Pressure on the country’s once leading bank rose enormously last week after the regulator said it had to raise a further €3bn in capital on top of the €7.4bn already identified to shore up its capital base.

The higher requirement ended any chance of the bank staying independent. The deal will raise €1.5bn, of which €900m will be used as capital.

The Financial Regulator shocked the markets and AIB’s management last week when it said it would need an additional €3bn of capital.

The Government, which owns almost 19% of AIB, said it will underwrite a €5.4bn capital raising next month, prompting analysts to forecast the state will end up owning about 90% of the bank.

AIB shares ended down 8.5%, yesterday, a fall of 4 cent to 41 cents.