Allied Irish May Be 90% State-Owned By Year-End, Davy Says

Ireland may need to inject 3.5 billion euros ($4.7 billion) of capital into Allied Irish Banks Plc by the end of the year, leaving it with a 90 percent stake in the nation’s second-largest lender, Stephen Lyons, an analyst with Dublin-based securities firm Davy, said.

The so-called Credit Institutions (Stabilization) Bill, published today, allows the government to inject capital into the Dublin-based bank before the end of the year to ensure it meets regulatory requirements, the finance ministry said.

Allied Irish is reviewing the legislation and “will continue to hold discussions with the state authorities regarding the receipt of capital,” the bank said in a statement today.

The country’s central bank ordered lenders on March 30 to achieve an 8 percent core Tier 1 equity ratio by the end of December as bad loan losses mounted following the collapse of a decade-long real-estate boom. Lenders must have capital ratios of at least 12 percent by the end of February, according to new targets, set by the central bank on Nov. 28, as Ireland agreed to an 85 billion-euro international aid package.

Allied Irish said Nov. 30 it needs to raise 9.8 billion euros by the end of February and that the government, which said in September it expected to take a majority stake in the lender, will provide whatever capital the bank can’t raise.

Allied Irish would need a 3.5 billion-euro injection to maintain an 8 percent core Tier 1 minimum at year-end after accounting for expected loan losses, Lyons said by telephone today. This would result in a 90 percent stake, based on current share prices, if the capital were in the form of equity and Allied Irish didn’t share some of the cost with junior bondholders, he said.

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