Bank of Ireland sale keeps it out of state hands
DUBLIN, July 25 - Ireland sold a 1.1 billion euro (983.4 million pounds) stake in Bank of Ireland (BKIR.I) to a group of unidentified investors on Monday to keep the country's largest bank out of state hands and provide a rare boost to a battered sector and bruised economy.
The government had been widely expected to take control of Bank of Ireland, the last domestic lender outside of state ownership, after it agreed to underwrite a rights issue, the results of which are due on Tuesday.
However -- after the sale and rights issue -- the government will now own maximum 32 percent in the bank while new investors will hold between 14 and 37 percent, the finance ministry said.
"It has been recited far and wide that it is impossible for Ireland to get money on the markets," Finance Minister Michael Noonan told national broadcaster RTE.
"Now we have significant private sector investors prepared to put money into Bank of Ireland and that's a strong signal internationally."
It is the second significant boost for the Irish government after European partners last week agreed to cut the rate it is charging for a multi-billion euro bailout by 2 percentage points, a change Dublin says could save it up to 1 billion euros per year.
Dublin, which has closed two of its six domestic lenders, merged another two state-controlled institutions and will soon take over a fifth. It has put a 70 billion-euro price on drawing a line under its banking crisis after stress tests in March.
Bank of Ireland was told to raise 4.2 billion euros in additional core tier one capital following stress tests in March. The tests were required under the terms of the 85-billion euro EU-IMF bailout Ireland received late last year.
The state has shrunk the bill for bailing out its banks by around 5 billion euros by sharing losses with subordinated debt holders. Bank of Ireland raised 1.96 billion euros by hitting junior bond holders with losses of up to 90 percent and expects to secure another 510 million from further burden sharing.
The bank's shares, which reached nearly 12 euros in early 2007 when Ireland's property boom was at its height, cost 11 euro cent on Monday, up 8.9 percent on the day...
Analysis: UniCredit to lead cash queue if EU crisis worsens
Reuters) - UniCredit (CRDI.MI), Societe Generale (SOGN.PA) and Deutsche Bank (DBKGn.DE) may have passed the recent health check of Europe's banks, but they are likely to be among the first big lenders in need of cash if the euro zone crisis worsens.Europe's "stress test" of its lenders was widely derided as too soft, but it shone a light on potential trouble spots.
UniCredit could need up to 5.6 billion euros and both SocGen and Deutsche Bank would need about 3 billion euros to reach new global capital standards in the event of a two-year recession and after applying more realistic losses on their euro zone bonds, according to Reuters estimates.
UniCredit is expected to raise capital when the rules become clearer later this year and analysts reckon it could be looking for 5-7 billion euros. Whether more big banks join it is likely to hinge on the speed and severity with which the euro zone crisis plays out.
"Many banks out there will have to raise capital in the event there's contagion due to the Greek, Portuguese and Irish issues," said Guy de Blonay, who runs Jupiter's Financial Opportunities Fund.
A rescue deal for Greece last week eased fears the crisis will spread. But the threat remains real, and some think that because the first selective default has occurred it is now more likely Ireland and Portugal will follow...