Black day for banks as spectre of state control draws nearer
It was feared that by the end of his speech to the Dáil yesterday, Finance Minister, Brian Lenihan, would have taken a 70% stake in AIB, but that did not happen.
Fears were expressed also that under the new capital regime, 40% of Bank of Ireland would end up in state hands, once the NAMA discounts on the bad loans held by the banks were unveiled.
Those possibilities have not gone away, and it is clear from the regime laid out yesterday by the regulator that the banks have a fight on their hands to fend off full or part nationalisation.
AIB says it can, by asset disposals, go a long way to meeting the €7.4bn in new capital to shore up its balance sheet.
While analysts expected the bank would have to raise no more than €6bn in fresh capital, the tough demands of the regulator has pushed that figure to more than €7bn, raising fears that the bank will in the end fall under majority control of the state.
AIB said that apart from the €445m raised earlier in the year through a bond exchange, it is moving towards a “self help” plan involving asset disposals.
“The distinct assets that we plan to sell principally comprise our UK business, our interest in BZWBK and our interest in M&T.
” We have appointed AIB Corporate Finance and Morgan Stanley in relation to the sale of BZWBK and our interest in M&T, and AIB Corporate Finance in relation to the sale of our UK business,” it said.
It expects to exceed market estimates for those sales “and meet a substantial part of our overall need for capital”.
That remains to be seen.
The Government is extremely annoyed that it has taken AIB as long as it has to sell off some of those assets to plug the huge hole caused by the NAMA writedowns.
With those assets sales and a rights issue later in the year, the bank said it can deliver on the regulator’s demands for fresh capital, provided “any residual requirement” is met by a conversion of Government preference shares into ordinary shares, it said.
Today, Bank of Ireland will announce results for the nine months to end December, 2009, at which time it is expected to outline plans to tackle its €2.2bn capital shortfall which was in line with market expectations and much less than the hole AIB is in.
Elsewhere, Irish Nationwide is on the road to nationalisation, while EBS effectively will be state controlled as well, according to the minister, in what can only be described as a black day for the country and the entire banking sector.
