Dublin pre­pares to in­ject €3.7b into AIB

The Pak Banker - - Front Page -

DUBLIN: The Ir­ish govern­ment took a step on Thurs­day to­wards ef­fec­tively na­tion­al­is­ing Al­lied Ir­ish Banks, the coun­try's sec­ond largest gen­eral lender, as it pre­pared to in­ject €3.7bn into the bank.

Brian Leni­han, fi­nance min­is­ter, will seek per­mis­sion later on Thurs­day from the Dublin High Court to make the new cap­i­tal in­jec­tion from the coun­try's Na­tional Pen­sion Re­serve Fund, na­tional broad­caster RTE re­ported.

The Ir­ish govern­ment had bat­tled for the last two years to limit its own­er­ship to no more than 75 per cent, even as AIB sold bil­lions of eu­ros in com­mer­cial prop­erty loans at av­er­age dis­counts of as much as 59 per cent to the Na­tional As­set Man­age­ment Agency, the govern­ment's "bad bank". Nama was set up last year to take over €87bn in loans that five len­ders reck­lessly ad­vanced to prop­erty de­vel­op­ers dur­ing Ire­land's eco­nomic boom.

But ma­jor­ity state own­er­ship be­came a cer­tainty af­ter the Euro­pean Union and In­ter­na­tional Mon­e­tary Fund last month pledged €67.5bn in res­cue loans to Ire­land and said that the coun­try's banks would re­quire higher re­cap­i­tal­i­sa­tion amounts than those the Ir­ish au­thor­i­ties had tar­geted.

De­spite wide­spread mar­ket scep­ti­cism, AIB had re­peat­edly stated that its so-called "self help" pol­icy of sell­ing most of its op­er­a­tions out­side the re­pub­lic would keep it free of ma­jor­ity state con­trol, even as loan losses es­ca­lated in the Ir­ish prop­erty crash.

The govern­ment al­ready owned 18.6 per cent of AIB's or­di­nary shares af­ter it in­jected €3.5bn in pref­er­ence shares into the bank early last year. An­glo Ir­ish, Ir­ish Na­tion­wide Build­ing So­ci­ety and EBS Build­ing So­ci­ety were taken into full state own­er­ship last year.

AIB said last month that the Cen­tral Bank of Ire­land had cal­cu­lated it would need to raise an ad­di­tional €9.8bn to help it meet the EU-IMF re­quire­ment to boost its core tier 1 buf­fer re­serves. The lender also said the €3.4bn raised from the agreed dis­pos­als - its 70 per cent owned Bank Za­chodni WBK in Poland to Spain's San­tander and the sale of its 22 per cent stake in M&T Bank in the US - would also help it reach the new tar­get. AIB's ef­fec­tive na­tion­al­i­sa­tion is ex­pected to trig­ger the long-de­layed re­struc­tur­ing of Ir­ish bank­ing sys­tem. -PB News

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