Allied Irish Banks Plc, Ireland’s second-biggest bank, has tripled its reliance on funding from central banks since the end of June as companies and customers pulled money amid the country’s debt crisis.
The bank’s dependence on “monetary authorities” rose to 27 billion euros ($37 billion) from a “high single-digit” billion-euro amount on June 30, Alan Kelly, general manager of group corporate services at Allied Irish, said in a telephone interview today. Funding conditions were “increasingly challenging,” the Dublin-based lender said in a statement.
Irish lenders have become more reliant on European Central Bank funding after being frozen out of wholesale markets. The amount of ECB loans to the country’s banks rose 7.3 percent to 130 billion euros in October from the previous month, Ireland’s Central Bank said on Nov. 1. The data include both international and domestic banks operating in Ireland.
“We hope the ongoing discussions between the government and International Monetary Fund and European Union will help bring clarity and finality to Ireland’s banking situation,” said Oliver Gilvarry, head of research at Dublin-based Dolmen Securities, by telephone.
Deposits dropped by about 13 billion euros since the start of the year, Allied Irish said in the statement. That equates to about a 17 percent decline, Kelly said. Allied Irish said it will increase the amount it’s seeking to raise in a share sale by the end of the year to 6.6 billion euros from 5.4 billion euros.
Allied Irish traded 4.6 percent higher at 43.5 euro cents at the close of Dublin trading for a market value of 470 million euros.
Finance Minister Brian Lenihan said yesterday he would welcome the creation of “substantial contingency capital funding” for Irish banks, as, EU, IMF and ECB officials started talks in Dublin about a possible bailout of the debt-laden country.
Allied Irish said its loan-to-deposit ratio, excluding the Polish unit it agreed to sell in September, rose to 159 percent at Sept. 30 from 151 percent at the end of June.
While the bank was operating “in an exceptionally challenging funding environment,” its liquidity should be “positively impacted” over the coming months by the conclusion of the 1.5 billion euro sale of its 22.4 percent stake in U.S. lender M&T Bank Corp., the bank said. It also expects to receive 3.1 billion euros in the first half of next year from the sale of Bank Zachodni in Poland, agreed on Sept. 10.
The bank has also received 5 billion euros in government-backed bonds as payment for loans the lender has transferred so far this year to the National Asset Management Agency, the country’s so-called Bad Bank set up to take over lenders’ riskiest commercial real-estate loans.
By comparison, Bank of Ireland Plc, the country’s largest lender, said on Nov. 12 it has 20 billion euros of net borrowings from “monetary authorities,” compared with 8 billion euros at the end of June.
Irish Life & Permanent Plc, the only domestic lender to avoid a bailout so far, said on Nov. 17 its banking division’s borrowings from the ECB rose to 11.7 billion euros at the end of September, up from 8.1 billion euros at the end of June.