BANK of Ireland was tipped to emerge as a winner of the financial crisis yesterday after it announced a €3.4bn (£2.9bn) fundraising to avoid the need for more state aid.
The Irish Republic’s largest lender said it would raise €1.9bn through a rights issue and €500m in a placing with institutional investors. The remaining €1bn will come from converting part of the government’s existing stake, held in preference shares, into common stock.
The move comes after the Financial Regulator told the bank it had to raise €2.7bn by the end of the year to meet new minimum capital requirements. The alternative to Bank of Ireland’s fundraising would be accepting more capital from the government.
Under the programme set out yesterday, the state’s share in the bailed-out institution will rise slightly from 34 per cent to 36 per cent as it will take up its rights.
Bank of Ireland head Patrick Molloy described the plan as “a significant turning point” for the group and its shareholders. Brian Lenihan, the Irish finance minister, added that it was good news for taxpayers and the wider economy.
Bank of Ireland becomes the first lender to step out of the shadow of national protection in the aftermath of Ireland’s property crash. With other banks queuing up for a fresh round of capital injections, analysts said Bank of Ireland’s progress positioned it to gain market share.
Ciaran Callaghan of NCB said: “It’ll be able to concentrate on its franchise. Bank of Ireland is well on its way to emerging as a winner of the banking crisis.”
The rights issue will see 326.8m shares placed at a 15 per cent discount to Friday’s closing price of €1.80. Shares in the bank rose 6.1 per cent to €1.91 yesterday.