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E-mailAIB is re-considering a quick sale of prized asset Bank Zachodni WBK, the Polish commercial bank in which it holds a 70.5% stake, in favour of either keeping the investment to boost retained earnings or holding out for a premium price to minimise the need for future government capital injections.
According to analysts who have spoken to the bank's senior management, AIB is holding off on proceeding with a disposal, because BZWBK's profits could add more capital to the parent bank through the recession than a sale at a relatively low price. Last year BZWBK returned a €263m profit to AIB. Its market capitalisation is about €1.3bn.
Commenting on the development, Emer Lang of Davy said: "There is a value below which it probably makes more sense to keep what is still a solidly profitably business. Where that price might be is hard to guage, as strategic considerations have a role to play."
AIB has said it needs to raise €1.5bn in fresh capital to absorb mounting losses.
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"AIB has said it needs to raise €1.5bn in fresh capital to absorb mounting losses."
Seems you have forgotten about the debt swap AIB did about three weeks ago. That swap netted AIB about 1 billion in additional core capital. The number AIB needs is now 500 million euros. And it must be raised by December 31 if AIB wants to eliminate 40% of the warrants (exercisable beginning in the Spring of 2014) that were given to the Irish Government as part of the 3.5 billion euro recap deal done a couple of months ago. If AIB raises the 1/2 billion additional euros, the maximum number of common shares that the Government's warrants will net is 15%. Right now the warrants can be exercised - beginning five years from now - for up to 25% of the common.
As a result of the debt swap, AIB needs to raise only 500 million euros by the end of the year to knock out 40% of the Government's warrants. This is why the sale of the Polish sub is not as pressing as it was a short while ago.
Look for a rights offering toward the end of the year.