AIB dismemberment must be stopped

AIB needs to raise €7.4 billions of equity capital by the end of 2010.

Doherty and the AIB board want to basically liquidate the non-RoI part of the bank to raise as much money as possible and stave off those horrible proles, Joe and Mary Public and their children and grandchildren. Bankers somehow don’t seem to fancy the great unwashed unless they want their money – subsidised and clean. No accountability or any of that prissy stuff.

Goodbody Stockbrokers (AIB owned) calculate that AIB would get €4.7 billions capital gain from the sales and leave them needing only €2.7 billions.

Barclays Capital on the same week calculates that the sale would only raise €1.7 billion for capital. This consists of a loss from the sale of AIB UK and First trust in Northern Ireland which will reduce Tier 1 capital by €470 million. Sale of the interest in American Credit Bank in Bulgaria would lose €74 millions. Sale of the 22.5% interest in US M&T bank would raise €989 million.

Profit from the Polish Zachodni bank sale would be €1.27 billions because of heavy investment there.

The UK sale would reduce AIBs risky assets by €18.4 billions which would be better later and now limits losses to the here and now. Barclays concludes that this would lower the capital raising target ratio from €7.4 to €5.5 billions. There AIB would need to raise a further €3.3 billions in capital.

NCB stockbrokers say that AIB would get €4 billions from the asset sales.

If these disposals are finalised before the state takes a majority share, AIB as an entity would be much weakened and less valuable. I have already done the calculations for Bank Zachodni in Poland and the conclusions are obvious. First Trust must be kept as I live in Ireland and our main banks must be all-island.

It appears that AIB may only hold €480 million in key buffer reserves by the end of the year after the transfer of key commercial property loans to NAMA.

My conclusion is that AIB will be in state ownership soon and the Minister for Finance, Brian Lenihan must act in public to guard the best interests of the public which certainly preclude the dismemberment of AIB as it is now.