Ireland’s government will probably take a majority stake in Bank of Ireland Plc, one of the last two banks left in private ownership, after a share sale next week, analysts said.
Bank of Ireland is trying to raise 1.9 billion euros ($2.7 billion) in a rights offering that closes on July 26. Investors are being offered shares at 10 cents each, compared with 10.2 cents the shares are trading at today. The Dublin-based lender said July 8 that the state’s holding may be between 29 percent and 70 percent, depending on take-up of its share sale.
“Appetite among our clients for the new shares is quite low,” said Colm Foley, an analyst at Goodbody Stockbrokers, the country’s second-largest securities firm, said by telephone. The government will likely end up controlling as much as 65 percent stake of the lender, he said.
Ireland may own its entire banking system by the end of this month, as the government injects cash into the banks to help meet new capital targets. The state already controls Anglo Irish Bank Corp., Irish Nationwide Building Society and EBS Ltd., with Irish Life & Permanent Plc also close to falling under the state’s aegis.
“With the share price trading close to the rights offer level of 10 cents, and sometimes dipping below it over the past few weeks, there really isn’t any incentive for investors to subscribe for the new shares,” said Michael Cummins, a director at Dublin-based fixed-income firm Glas Securities. “Majority state ownership would appear the most likely outcome.”
Bank of Ireland shares have fallen 70 percent over the last six months, and traded at 10 cents as of 3 p.m., giving the company a market value of 559 million euros. Bank of Ireland spokesman Dan Loughrey declined to comment on the state’s future stake, as did Finance Ministry spokesman Eoin Dorgan.
The bank continues to talk with “other sources of private capital,” the lender said this month.
In all, the bank needs to raise 5.2 billion euros to shore up its balance sheet against mounting bad loan losses and meet new regulatory capital targets.
“While the bank continues to talk to other sources of private capital, it remains to be seen whether private capital will ultimately materialize,” Cummins said.
Investors in Allied Irish Banks Plc, the nation’s second-largest lender, also meet July 26 to vote on the government’s plans to raise its stake in the lender to 99.8 percent from 93 percent. The bank reports first-half earnings on July 25.
Finance Minister Michael Noonan said on July 20 that the government has a legal option to seize control of Irish Life & Permanent, the third-largest lender, after shareholders rejected proposals for a capital injection from the state.
“I’d be surprised if the government ended up with less than 60 percent,” of Bank of Ireland, Karl Goggin, an analyst with Dublin-based NCB Stockbrokers, said. “Still, it’s a result that they’ll manage to keep the government’s stake below the 75 percent level, after which they’d have to delist from the main stock markets.”