ANALYSIS:AIB plans to make further announcements on disposals before the end of this month, writes SIMON CARSWELL, Finance Correspondent

AIB HAS taken one step on the long path to raising the €7.4 billion it requires by the end of the year to boost its capital reserves but there’s still a mountain ahead.

The €3.1 billion sale of the Bank Zachodni WBK, the bank’s self-professed “jewel in the crown”, and a 50 per cent share in BZWBK’s asset management firm, has generated a tranche of that capital. This leaves a €4.9 billion shortfall which – given the current financial climate and the poor sentiment towards Ireland in the debt markets – means Colm Doherty, the bank’s managing director, is facing a hard slog.

There is still plenty of interest, he says, in AIB’s 22 per cent stake in US bank MT and in the bank’s UK business, which includes First Trust in Northern Ireland.The other climbing tool in AIB’s rucksack is a rights issue of new shares to the bank’s shareholders. The bank has received “positive feedback”, he said, in its “investment story” after sounding out the market. He believes AIB shares represented “a value stock”. Analysts estimate that the bank will raise capital of about €4.4 billion from the sale of its overseas businesses, leaving a shortfall of up to €3.4 billion that the bank must seek by tapping investors to avoid majority State ownership.

Bank of Ireland managed to raise €3.5 billion on a capital raising plan, including €1.7 billion from retail investors, €1 billion from the State and €500 million from institutional investors.

However, the bank – the first domestic institution to reach the Financial Regulator’s new capital targets – enjoyed first-mover advantage before the Greek debt crisis brought the financial markets to another crisis-point. AIB is facing a more challenging push for the summit given the uncertainty surrounding the final cost of Anglo Irish Bank, its effect on the public finances and the ability of the Irish banks to stand on their own without guarantees. AIB plans to make further announcements on the sale of its MT stake and the UK business before the end of this month.

The bank will hope this will raise the share price to a level that can make the rights issue work. It will need to before the bank can unveil the share sale over the coming months given that the capital shortfall amounts to eight times the bank’s market value.

As its stands, there is a very real prospect that the State will be left with a controlling interest in a fourth financial institution.