AIB WILL announce its equity-raising plans around September this year, executive chairman Dan O’Connor told shareholders at the group’s annual meeting in Ballsbridge yesterday.
A rights issue and an equity placing with private investors underwritten by international investment banks or the Government could feature in the fundraising, he added. This will form part of AIB’s plan to raise €7.4 billion to meet new capital ratios set down by the Financial Regulator.
AIB has until the end of the year to raise the funds. The bank has placed its overseas assets up for sale. Mr O’Connor said he did not want to sell these businesses but the bank was left with no choice as it seeks to agree a restructuring deal with the European Commission.
“We have very, very valuable assets in Poland, the US and the UK,” he said.
In relation to Bank Zachodni in Poland, Mr O’Connor said: “I have no desire to sell that bank. It kills me to sell that bank but it has to be sold.”
Mr O’Connor also outlined how the State will convert some of its preference shares into a stake of between 16 and 17 per cent in AIB in mid-May.
AIB was to have paid a dividend of about €280 million on May 13th to the State relating to the preference shares that were issued last year when the bank was given €3.5 billion in State aid. The European Commission has blocked this payment, as it did with Bank of Ireland, and so the State will receive ordinary shares in the bank instead.
In relation to how much of the bank might ultimately be owned by the State, Mr O’Connor said: “The extent of the Government’s stake will become clearer in the coming months after we implement our planned actions.”
He reiterated that the Government would make up any shortfall in its €7.4 billion capital raising.
Analysts have estimated that the bank’s overseas assets could be worth €4 billion-€5.5 billion. Mr O’Connor said a failure to sell these assets would result in the bank seeking a bigger handout from the Government and would “wipe out all shareholders”.
“That would not be fair on the taxpayer,” he added.
Mr O’Connor insisted that its overseas assets would not be sold at a knock-down price. “We have time; this is not a fire sale.”
He said the regulator had agreed that it was sufficient for AIB to have identified a buyer for its assets by year end in the context of its capital raising.
Mr O’Connor described AIB’s financial performance in 2009 as “highly unsatisfactory”. It made a loss of €2.65 billion in 2009.
“We lent too much money to the property and construction sector in Ireland in recent years and, as a result, most of our present problems were self inflicted,” Mr O’Connor said.
He said 258 loans had transferred to the National Asset Management Agency (Nama) in the first tranche of €23 billion of development loans that will be transferred by AIB. “The second tranche is now in process,” he explained.
He said AIB’s trading performance in the year to date was “broadly in line with our expectations in what continue to be very challenging conditions”.
In a first for the Irish Bank Officials Association, its general secretary Larry Broderick addressed the AGM. Mr Broderick made the case for First Trust Bank in Northern Ireland and AIB’s business banking arm in Britain not being sold. These companies employ 2,800 people between them. “Given the depressed market conditions, selling them off at a cut price to secure a marginal reduction in State ownership is penny wise and pound foolish,” Mr Broderick said.
Mr O’Connor replied: “The decisions facing the bank are stark. The EU requires us to shrink this bank. We have to try and structure AIB for the future.”
