Irish banks ask shareholders to support bad bank scheme or risk nationalisation

BANK of Ireland and Allied Irish Banks may net &euro;28bn (&pound;26bn) from selling toxic property loans to the country&rsquo;s so-called &ldquo;bad bank&rdquo;.<br /><br />Both banks warned their shareholders to accept the plan to sell the assets at a steep discount to the government&rsquo;s National Asset Management Agency (NAMA) or they could face further financial difficulties and nationalisation. <br /><br />Bank of Ireland chief executive Richie Boucher said: &ldquo;There is no alternative executable option available to the bank which would deal with these aspects of our balance sheet.&rdquo; <br /><br />NAMA will buy the loans at a discount of up to 30 per cent, giving Bank of Ireland around &euro;11.2bn from the sale. Based on the same discount, Allied Irish said it may receive &euro;17bn.<br /><br />The final discount will only be known when NAMA carries out due diligence on the loans on an individual basis. Investors reacted badly to the news, as analysts had hoped there would be more clarity about the level of discount the banks expect to achieve. <br /><br />Shares in both banks fell sharply, with Bank of Ireland shares down five per cent to &euro;1.61 in Dublin, while Allied Irish declined nearly six per cent to &euro;1.55.<br /><br />Ireland plans to rid the country&rsquo;s lenders of toxic property assets by buying about &euro;77bn of loans through NAMA. The two banks will each hold meetings for shareholders to vote on the proposals, with the purchase of loans due to complete by the middle of the year.