Irish banks are slipping down the core capital league table as other European banks hit the markets to raise fresh funds in cash calls – a development which could sate investor appetite and leave Irish banks starved when they eventually go looking for equity themselves.
European banks are heading for equity Tier 1 capital ratios in excess of 8% – with some targeting 10% – while Bank of Ireland and AIB are aiming for a more moderate 5%-6% post-Nama level, according to broker sources who met with the banks last week. Those figures could go even lower if the banks increase lending following the transfer of assets to Nama in the next 12 months.
Both of the big two banks have indicated they intend to raise new capital to bolster their balance sheets, but have ruled out rights issues or asset disposals in the short term, a decision that could leave them chasing the pack as their European peers gobble up available funds.
Last week Norwegian bank DnB Nor became the latest Nordic lender to go looking for new capital when it announced plans for a $2.4bn rights issue, which would put its equity Tier 1 ratio at 10.2%. Several other European banks are planning rights issues in the coming months, including RBS, Lloyds, BNP Paribas and Unicredito.