Finance seeks advice on bank shareholdings

The Department of Finance is to tender for corporate advisers to assist it in developing a strategy for the State’s shareholdings in the domestic banks.

Their first task is likely to involve advising the Government on resolving issues around its preference shares and contingent capital notes (CoCos) in AIB. which is 99.8 per cent State-owned.

The department is also setting up a panel of between five and seven law firms to draw from for advice on financial issues. To date, it has used three firms it inherited from the National Treasury Management Agency – A&L Goodbody, Arthur Cox and Matheson.

A spokesman for the department said it would begin the tender process for law firms in the coming weeks and said the move was in line with “best practice”.

AIB's chief executive David Duffy wants to tidy up the bank's capital structure in advance of seeking external investors for AIB next year and revealed yesterday that he had held discussions with the department on these matters.

“The Department of Finance has agreed to engage with us to resolve the preference shares capital and the conversion of them into equity and to discuss potential options around the CoCos,” Mr Duffy said at a press conference to discuss AIB’s annual results.

“We would expect to get to the end of the year with a clear, simplified balance sheet in terms of equity, with probably some repayment of the CoCos and some confirmation that the [ECB] stress tests are not going to produce a material event for AIB.”

The preferences shares were issued in 2009 in return for a €3.5 billion cash injection from the State. The Government also holds €1.6 billion worth of CoCos, dating from 2011.

On when AIB might seek external investment, Mr Duffy said it first had to deliver a sustainable profit and prove its capital adequacy.

“That means at the end of this year the bank is investable. Therefore, the Minister will decide, at his discretion, that there is the option [of external investment] in the first half of 2015 onwards.”