AIB has reached an agreement with Banco Santander, Spain's biggest bank, to sell its Polish interests for €3.1 billion.
AIB sold its 70 per cent stake in Bank Zachodni WBK to bolster its balance sheet, which has been depleted by the economic slump and property loan losses.
The Irish bank is seeking to raise a total of €7.4 billion by the end of the year to meet new regulatory capital targets. Bank Zachodni is Poland’s third largest bank based on profits.
"This sale will generate significant capital for AIB and represents the first step of our recapitalisation plan that was set out in March," AIB Group Managing Director Colm Doherty said in a statement.
"We continue to make progress on other elements of the recapitalisation plan and will make further announcements in due course." AIB has been forced to put its overseas assets, including a 22 per cent stake in US bank M&T, and its British business up for sale to compensate for massive losses on its property portfolio and to meet tougher capital targets.
The cash proceeds from the sale of Zachodni will be used as an additional source of liquidity for the bank, AIB said.
AIB said Santander's acquisition would be carried out through a public tender offer for 100 per cent of the capital of Zachodni, which AIB will accept for its stake, and the disposal is subject to regulatory and shareholder approval.
“We continue to make good progress on other elements of the recapitalisation plan and will make further announcements in due course,” he added.
General Secretary of the Irish Bank Officials’ Association (IBOA) warned of possible job losses.
“The proposed sale of AIB’s stake in Bank Zachodni will come at a substantial cost to the staff of AIB in Ireland,” said IBOA general secretary, Larry Broderick.
"A significant number of 'back-office staff' in this country are directly involved in providing support to the Polish
operation. Their jobs will be immediately under threat if the sales goes ahead," he said.
AIB confirmed a break fee of €7.5 million will be paid to Santander if AIB shareholders do not approve the sale at an extraordinary general meeting.
Shares in AIB closed down nearly 1 per cent at €0.743 in Dublin before the deal was announced. Shares in Santander were down 0.1 per cent at €9.9
Santander, Spain's largest bank, said it expects the deal for Zachodni to close next year and generate an 11 per cent return on investment after the third year of the acquisition.
Additional reporting: Reuters