State to reduce BoI shareholding

BANK of Ireland said the state will reduce its shareholding to 15.1% after the lender’s rights offering this week, making it the only one of the country’s six largest lenders to escape Government control.

The bank said yesterday that in the interests of dealing with “speculative rumours”, the names of the investors making a significant investment in the bank are led by Fairfax Financial Holdings and include WL Ross, Capital Research (part of the Capital Group), Fidelity Investments and Kennedy Wilson.

The Government, which owned 36% of the bank before the rights offering, agreed on Monday to sell a stake to a group of institutional investors.

The investors will own 34.9% of the bank.

Yesterday, Bank of Ireland said 60% of shareholders took up shares in the lender’s rights issue, a higher than expected result.

The bank sold a €1.1 billion stake to a group of unidentified investors on Monday, ensuring it would stay out of full state control and changing shareholder sentiment at the last minute.

Excluding the state’s entitlement to just over one-third of the new shares, existing private shareholders subscribed for 36.8% of their rights.

“Most guys would have thought that figure would have been around 25%, so maybe not all is lost in Irish banking,” one Dublin-based trader said.

Ireland has closed two of its six domestic lenders, merged another two state-controlled institutions and on Tuesday took over a fifth. It put a €70bn price on drawing a line under its banking crisis after stress tests in March.

Bank of Ireland was told to raise €4.2bn in additional core Tier One capital following the stress tests, which were required under the terms EU/IMF bailout.

As well as the €1.91bn rights issue and stake sale, the bank has raised €1.96bn by hitting junior bondholders with losses of up to 90% and expects to secure another €510 million from further burden sharing.

The “rump” that remains will be placed between the new investors and the Government.

“Following the announcement that a group of institutional investors is investing circa €1.1bn in the bank, the take-up rate of 59.55% is positive for the bank,” Dublin-based Glas Securities said in a note.

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