AIB under pressure to sell overseas assets
It has been estimated AIB will need an extra €7.4 billion of equity capital while Bank of Ireland will need €2.7bn.
As a result AIB, which is now the country’s second biggest bank, is planning to sell its British business, its interest in Polish bank BZWBK and its 25% stake in US bank M&T.
Finance Minister Brian Lenihan said AIB is in a position to be able to raise capital through overseas asset sales and will “immediately” start selling these assets. The bank said the sale of such assets may meet a “substantial” part of its capital needs.
The bank was put under pressure by Mr Lenihan, who said that if it is unable to access sufficient private capital, it is probable that the state will have a majority holding in the bank.
AIB said in a statement last night: “We expect the aggregate proceeds from those sales, based on today’s market conditions, to exceed market estimates and meet a substantial part of our overall need for capital.”
AIB said the capital requirements, which must be met by the end of the year will be “significantly reduced” by capital actions it is taking.
AIB said it has a range of self-help options available to it. It has successfully undertaken a bond exchange exercise generating €445m of equity capital.
It has been estimated that the Government could end up with a 70% stake in AIB and a 40% state in Bank of Ireland.
Over the years AIB had been building up a significant presence internationally.
It invested in Poland by gradually building a majority shareholding of 60.1% in WBK between 1995 and 1996 and in 1999 reached an agreement with the Polish State Treasury to acquire an 80% shareholding in Bank Zachodni. It completed the merger of the banks in 2001 to create Bank Zachodni WBK and now owns about 70.5% of the combined bank.
In the US, in 2003 it completed a deal merging Allfirst, which was suffering large losses due to the activities of rogue trader John Rusnak at Allfirst, with M&T Bank, headquartered in Buffalo, New York.
