BOI announces plan to raise €3.4bn capital

Taxpayers will end up with a stake of no more than 36% in Bank Of Ireland under plans announced by the company this morning to raise €3.4bn in capital and avoid nationalisation.

The bank announced a placing of shares with large financial institutions to raise €500m.

It will also offer shares for sale next month to both existing and new shareholders at a discount to the market price - known as a rights issue - to raise €1.9bn.

Most of the remaining cash required to stem losses resulting from bad debts and loan transfers to Nama will be raised through the State converting part of its 25% preference shareholding in the bank into ordinary shares.

"Today's announcement marks a significant turning point for Bank of Ireland and its stockholders. The substantial private sector interest in the capital raising alongside the firm support provided by the State demonstrate the inherent strength of the Bank and confidence in its future," said Patrick Molloy, Governor of Bank of Ireland.

"We believe the completion of these proposals will provide strong foundations upon which to build stockholder value."

Meanwhile in a trading statement also issued this morning the bank said market conditions in Ireland and the UK in the first quarter of the financial year "remain challenging", but "economic conditions have recently shown some signs of stabilisation".

BOI said that as expected, challenging economic conditions, unemployment and weak consumer sentiment continue to impact its loan impairment charge

It added however that it continued to believe that loan losses on its non-NAMA-bound loan portfolios "have peaked".

Loan losses on these portfolios for the three-year period to March 31, 2011 remain within the loan loss guidance of €4.7bn, the bank said..