Problems at bank ‘can be resolved’

AIB’s new executive chairman David Hodgkinson has told shareholders the bank’s difficulties can be resolved, but warned tough challenges lie ahead.

Addressing yesterday’s extraordinary general meeting seeking the green light for the sale of AIB’s 22% holding in US lender M&T to raise €1 billion, the former HSBC senior banker said “while I know AIB’s problems are difficult, the difficulties can be overcome.”

Mr Hodgkinson disclosed yesterday he is being paid €500,000 annually, adding that his accommodation would also be taken care of by the bank.

There are no other payments involved, he said.

Mr Hodgkinson also announced that the troubled bank, now needing €10.4bn in recapitalisation would, also proceed with its €5.4bn fundraising later this month.

Depending on the take-up, the state could end owning up to 92% of the bank, but measures will be taken to ensure AIB will retain its stock market listing, he said.

Asked whether shareholders should take up the rights issue, he said it was something each individual would have to consider for themselves. The issue is being priced at 50c per share and the shares were trading well below that figure at present, he said.

On the disposal, which some shareholders opposed at the egm, Mr Hodgkinson said given the current pressures facing the bank, the board believes the disposal to be “in the best interest of the company”.

On the trading outlook, the chairman said the bank would not provide a trading update, but an Interim Management Statement will be issued later in the month, he said.

Recommending support for the resolution, Mr Hodgkinson said as a banker he believes AIB has an “extremely strong franchise” and has a strategic role to play in the future of the Irish economy.

The sale of the bank’s Polish bank, BZWBK, for €2.5bn has already been announced and M&T is another vital step in the recapitalisation of the bank, he said.

“My task, therefore, along with my colleagues, is to formulate and implement a plan of action which will build on AIB’s strengths and repair its weakness, a plan which will restore AIB to being a leading force both as a business and an employer,” he said.

As the Government struggles to resolve the banking crisis and to restore market confidence, the cost of borrowing to the state hit a new high of 712 basis points (7.12%) in late afternoon trading.

Bond prices spiked following the collapse of Portugal’s budget talks, while Greece’s tax shortfalls have added to concerns that peripheral European states may struggle to cut their deficit.