Lenihan discusses rescue plans with bank chiefs

The Minister for Finance Brian Lenihan met the chiefs of the six State-guaranteed banks and building societies today to discuss a rescue package that is likely to see a combination of recapitalisation and mergers within the sector.

Mr Lenihan, Central Bank governor John Hurley and senior Department of Finance officials discussed the options in separate meetings with the bank executives.

This morning they met with representatives from Irish Life & Permanent, the Educational Building Society and the Irish Nationwide Building. They met senior executives from AIB, Bank of Ireland and Anglo Irish Bank this afternoon.

Following their meeting, the chairwoman of IL&P Gillian Bowler said Mr Lenihan was working "very hard to construct a good solution” for Ireland's banking industry.

Banking shares, which rose sharply yesterday on reports of a co-ordinated initiative by the Irish Association of Investment Managers (IAIM) yesterday, were mostly lower this afternoon.

Irish Life & Permanent was alone in positive territory among the financials gaining 4 per cent to €1.70 after falling in early trade. Anglo Irish Bank stock has seen the sharpest falls today dropping 14 per cent to 80 cents.

AIB shares were 2.5 per cent lower at €2.70 while Bank of Ireland also tracked lower at €1.42 by 1.29pm, a drop of 6 per cent.

The Irish Times reported this morning that Aviva Investors, F&C Ireland and Setanta Asset Management have given tentative support to the IAIM plan which would see a co-ordinated investment in the banks with a co-investment by the State.

It emerged this afternoon that Deutsche Bank has been appointed financial advisor to this group. In a statement a spokesman said the “group is assessing whether the recapitalisation of the banks presents an attractive investment opportunity for its clients".

Under this plan the State would match an investment from the private companies in a deal that would pump more than €4 billion into the six Irish banks covered by the guarantee scheme.

The co-investment plan is one of a number of options open to Government, including approaches from a consortium of fund managers as well as nationalisation.

Mr Lenihan welcomed the IAIM move yesterday describing it as a sign that people were willing to invest in the State but declined to indicate whether the Government was prepared to co-invest.