Shareholders back AIB nationalisation despite protest

THE nationalisation of AIB has been approved by the bank’s shareholders, despite opposition from the floor at its EGM in Dublin yesterday.

The move — which ultimately sees the Government stump up around €12.6 billion of AIB’s total post-March capital requirement of €14.8bn (made up of AIB’s €13.3bn target and the €1.5bn needed by the EBS Building Society, which is now part of the AIB group) — will result in the state having a 99.8% share of what is being promoted as one of the two pillars of the new Irish banking landscape.

Yesterday’s vote centred around the state buying further equity in the bank for €5bn, the issue of contingency capital of €1.6bn for potential future needs, the raising of around €2bn through the ‘burning’ of junior bondholders and €6.1bn in a further Government injection to meet targets.

The Government previously injected €7.2bn into AIB over the course of 2009 and 2010. AIB has raised between €5bn and €6bn through its own means; either via bondholder deals or asset sales.

A number of investors urged the rejection of the latest resolutions yesterday. High-profile shareholder Niall Murphy accused the Government of “stealing” €5bn from the National Pension Reserve Fund (NPRF) for AIB and “billions more for the other basket-case banks”; while Richard Boyd-Barrett TD opined that there is “little or no chance of AIB contributing to the future growth of the country” and urged the Government to better use the latest €5bn bound for AIB for boosting employment and lending to SMEs.

AIB’s executive chairman, David Hodgkinson, said that the board remains “acutely conscious of the enormous erosion in shareholder value” and that “serious mistakes” were made by the bank, “which can’t be allowed to happen again”.

He noted that after yesterday’s EGM/AGM, the AIB board will feature no member who was there before 2009.

Mr Hodgkinson said that the protection of the Government’s investment, rigorous governance within the bank and AIB playing a leading role in the recovery of the Irish economy should be seen as “minimum expectations”.

“Following these changes, AIB will have a strong foundation from which a profitable business can be rebuilt,” he added.

He also said that after €25bn was withdrawn from the bank since the start of 2010, deposit outflows have fallen significantly and that July saw an upturn in deposits.

Mr Hodgkinson said that AIB should have a new chief executive in place, from overseas candidates, by “the latter part of the year” and he claimed that the board’s long-term view is to bring the business out of state control.

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