Analysis: Board feels the heat even in season of giving

AIB chairman Richard Pym bears no physical resemblance to Santa Claus, but by handing over a cheque for just under €1.87 billion to the State on Thursday, he at least gives a passing impression of Kris Kringle.

This bounty is nicely timed for the Government, giving it a good news story just before the festive break and allowing it to balance the books this year in cash terms for the first occasion in a long time.

It all plays well in the run-up to the general election early next year and you can be certain Minister for Finance Michael Noonan will address this issue in some detail this morning when he attends an event hosted by AIB and the Strategic Banking Corporation of Ireland.

The cheque flows from the capital re-organisation approved by AIB shareholders on Wednesday following an extraordinary general meeting to tease out 12 resolutions.

Dividend payment

Holding the meeting was extraordinary in itself, given that the Government owns 99.8 per cent of the bank and made it clear last month that it fully supported the plan.

It involves the part-redemption of the Government’s 3.5 billion preference shares at a cost to the bank of €1.7 billion, plus a dividend payment of €166.4 million relating to the shares.

Only a couple of hundred war-weary shareholders bothered to turn out for the perfunctory gathering at the RDS in Dublin.

One of them wondered why the bank had gone to such expense when it could have held the meeting across the road at its Bankcentre head office. Pym said it was cheaper to hire the RDS than to close the staff restaurant and provide alternative catering arrangements for the 4,500 staff who work there. Go figure.

There were also complaints about the absence of coffee before the meeting and the accuracy and detail provided in the minutes of previous meetings.

Financial adviser Brendan Burgess told the board that AIB's mortgage rates were a rip-off and its profits would be plundered when overseas competitors eventually entered the Irish home loans market.

TD Shane Ross, who is never shy in front of a microphone, said it was a disgrace that AIB hadn't suspended its shares in light of the fact that the one-for-250 share consolidation and other measures would hammer those who had bought shares in the bank recently.

Share price

Part of the capital re-organisation involves the State converting 2.14 billion preference shares into ordinary stock that will begin trading on Monday morning. These are being converted at a price of 1.72 cent each, effectively setting a new floor on the bank’s share price.

AIB shares were changing hands on Wednesday at just more than twice that level, meaning the purchasers of the shares were already in the red. Ross’s argument was that share-trading should be suspended until such time as the stock market IPO happened next year.

Pym swatted away this analysis, arguing that Ross, as a former stockbroker, should know better.

Others vented their anger at how their savings had been wiped out by the bank’s collapse into State ownership. Pym offered them a handkerchief to wipe their tears but could provide little else by way of comfort.

The meeting broke up to allow polls be held on each of the resolutions. The result was already in the bag and there was more interest in the cocktail sausages.

So, €1.87 billion down. Just €19 billion to go before the slate is wiped clean. Another €1.76 billion will be forwarded to the exchequer when the contingent capital notes mature next July.

Ho, ho, ho!