AIB and Bank of Ireland will account for around 60 per cent of the assets to be transferred to the National Assets Management Agency (Nama), according to a report by Citigroup.
According to the study it expects the assets to be transferred to the NAMA at a 25 per cent discount. Citigroup says this will result in a in a pretax loss of €8 billion for AIB and of €5 billion for Bank of Ireland based on the transfer of loans worth €30 billion and €20 billion respectively.
For AIB this would represent a transfer of 23 per cent of its loan book and for Bank of Ireland 14 per cent. This would
It noted that the banks appeared to be in a weak position with regards to the scale of the assets transfer and pricing.
Although the scheme will remove some uncertainty from the system the credit losses and operating profits foregone on the transferred assets prompted Citigroup to estimate that both banks could require additional capital.
The Citigroup report estimates that AIB could need a further €2.1 billion in capital and Bank of Ireland €1.2 billion. Both banks have already been allocated €3.5 billion under the Government’s recapitalisation programme.
Citigroup has increased its target price for AIB to 60 cent and for Bank of Ireland to 40 cent, although it adds there is a “high probability that both banks will be majority Government owned”.
Separately a research note from Merrion Stockbrokers today said the Government may end up with a 70 stake in AIB and 55 holding in Bank of Ireland if NAMA buys the loans involved at a 20 per cent discount.
It said a discount of any more than 25 per cent would wipe out the equity bases of the two banks.