Sale holds no guarantees for AIB

THE sale by AIB of its Polish unit Bank Zachodni WBK for €2.5 billion has not guaranteed it will avoid falling under state control.

ING Group analysts said in a note yesterday that AIB “is not out of the woods yet” given its need to raise a total of €7.4bn in fresh capital by the year end in order to remain independent.

The figure is the amount set out by the Financial Regulator and which has to be in place by end 2010.

The next phase of the fundraising involves the sale of its minority stake in M&T in the US.

AIB expects to raise €1bn from that disposal, but that will still leave a substantial shortfall, that analysts have been saying it will struggle to achieve.

It has a branch network in Britain and a number of other options open to it but analysts fear the time frame is too short.

It is also emerging that the sale of the Polish operation could be hit by a number of strong objections. The sale has to be cleared by the Polish regulator, but the deal faces objections from PKO BP, the leading Polish bank and from BNP Paribas, who claim the buyer, Santander, had inside information in the run-up to signing off on the deal with AIB.

“Allied Irish needs to raise €7.4bn by the end of 2010 to reach targets set by the regulator,” said ING.

“However, the sale of the bank’s Polish operations is certainly a step in the right direction.”

“AIB is like Cinderella at the ball and we are getting close to midnight,” said James Forbes, senior equity strategist at Irish Life Investment Managers in Dublin. “The bank got a slightly higher-than-expected price for its Polish businesses, and now has to move quickly.”

Ireland was among the first countries in Europe to react to the financial crisis over the past two years by protecting depositors. Now it is being tested again as the Government tries to shield the economy from what Standard & Poor’s called the “increasing burden” of the banking system.

“Increasing fear of the unknown in relation to the banking system fuelled paranoia in the market over the past month or so,” said Jim Ryan, a director with Dublin-based Glas Securities, which specialises in bonds. “But we’ve seen a few pieces of jigsaw fall into place in recent days.”

Colm Doherty, AIB managing director, said recently he got a “tremendous price” for Zachodni given the “tight timeframe”.

“Colm will be doing his damnedest to avoid handing over majority of the bank to the Government,” said Mike Soden, former chief executive officer of Bank of Ireland. “The real problem is what will he be left with after he has sold assets.”

Additional reporting Bloomberg.


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