AIB sells off family silver

AIB YESTERDAY confirmed that it had converted preference shares owned by the Government into an equity stake of 18 per cent, in lieu of a dividend payment that the European Commission has blocked it from paying due to the nature of the state aid it has received.

With AIB needing to raise €7.4 billion in fresh capital to meet the Financial Regulator’s new capital ratio targets, AIB is frantically trying to sell the family silver to limit the state’s shareholding.

Hence, its decision to restart a process to sell its branch on Grafton Street, something that had been pulled by managing director Colm Doherty when he took over recently.

That sale might only bag AIB about €25 million but it’s symbolic in the context of its desire to minimise the state’s shareholding.

After years of being a drag on the group, AIB’s Polish banking arm is now considered the jewel in the crown. Executive chairman Dan O’Connor told shareholders at its recent AGM that it “kills me” to sell Poland.

Bank Zachodni WBK is Poland’s fifth biggest bank and the battle to acquire it appears to be hotting up. A report in Puls Biznesu newspaper this week quoted Zbigniew Jagiello, the chief executive of state-owned PKO-BP, Poland’s largest bank, as being prepared to run the rule over its rival.

Until now Jagiello had ruled out trying to make such an acquisition, saying its strategy of organic growth would preclude expansion through acquiring a competitor.

“We are not ambivalent about the fate of BZ WBK,” he told the paper. “If there is such a need, then we will have to become more interested in BZ WBK.”

AIB certainly won’t discourage his interest as it seeks to maximise its sale price. The more bidders the merrier.

Many other banks are already eyeing BZ WBK, which is expected to be sold by the end of this year. The paper suggested that the Polish bank would attract a value of 16 billion zlotys (€4 billion).

AIB owns 70 per cent, suggesting a windfall of €2.8 billion. If correct, it would put AIB well on the way to generating the €4.5-5 billion that most analysts estimate it will generate from selling its Polish and British businesses and its 22 per cent stake in MT in the US.