WITH FINANCIAL results slated for release at 7am today, Bank of Ireland remained silent last night about the various announcements yesterday relating to its loans that will transfer to the National Asset Management Agency (Nama) and its future recapitalisation needs.
In his speech to the Dáil yesterday, Minister for Finance Brian Lenihan said the bank had a “strong future” and would “maintain a presence in the international capital markets, provide loan finance to individuals and businesses, and support our economic recovery”.
On April 2nd, Bank of Ireland will release €1.93 billion in loans to Nama in the first tranche of transfers, receiving €1.26 billion in return from the agency. This relates to its exposure to the 10 biggest borrowers covered by the Nama scheme.
This equates to a discount of 35 per cent. While higher than the average 30 per cent discount that the Government signalled would be applied to Nama transfers in September 2009, it was the lowest applied yesterday to the five Irish-owned institutions moving loans to the agency.
In total, Bank of Ireland will transfer €12 billion in loans to Nama, which is lower than the original figure of €16 billion stated by the Government last year.
In parallel with this, the Central Bank and Financial Regulator have determined that Bank of Ireland requires an additional €2.66 billion in equity capital to meet its target of 7 per cent equity capital. Mr Lenihan said he had been “advised” that Bank of Ireland “expects to be able to raise private capital and is well advanced in its actions to address its capital needs”.
He added that this underlined the “strength of the institution”.
This plan to raise capital is likely to comprise three elements: a debt for equity swap, a private placement or rights issue, and a conversion of preference shares held by the Government to ordinary shares.
Details of its capital-raising initiatives are expected to be announced in the coming weeks after its restructuring plan has been approved by the European Commission.
The Government holds a 15.7 per cent stake in Bank of Ireland. This is expected to rise to just under 40 per cent when the recapitalisation is completed.
This will allow the bank to remain as an independent entity, albeit one with the State as a significant minority shareholder.
“I fully support the bank’s objective to meet a substantial amount of its capital requirements from private sources,” the Minister told the Dáil yesterday.
Like AIB, Bank of Ireland will be required to make €3 billion in credit facilities available to small and medium enterprises (SMEs) this year and next. In addition, it will provide €20 million to Enterprise Ireland for use as seed capital to support new ventures. It is also required to provide €100 million for environmental, clean energy and innovation projects.
The bank will be required to submit, within six weeks, an SME lending plan both by geography and sector for this year and next to the Department of Finance.