BoI changes its year-end so it can raise fresh capital

BANK OF Ireland has changed its financial year-end from March 31st to December 31st, paving the way for it to tap investors for fresh capital through a rights issue between April and June.

The change brings the bank in line with major European banks and for the first time means that the country’s six domestic lenders have the same December 31st year-end, following the change of Anglo Irish Bank’s fiscal year-end from September 30th last year.

The next results to be published by Bank of Ireland will cover the nine-month period from April 1st to December 31st, 2009.

The bank will report the nine-month results in late March, instead of full-year results to the end of March in May.

The change means it avoids a closed period from March to mid-May and can announce the rights issue after publishing its results late next month.

“It would have made life difficult if they had not switched it,” said Ciarán Callaghan, an analyst at NCB Stockbrokers.

The change allowed the bank “to sidestep any closed period in the crucial capital-raising window between April and the end of June”, he said.

The change also allows Bank of Ireland to embark on a roadshow to generate interest in capital raising for an estimated €1 billion and €1.2 billion supported by up-to-date audited accounts for investors. The bank needs €2 million to €3.3 billion, depending on whether the minimum capital ratios are set at between 6 per cent and 8 per cent of total assets.

It is reportedly seeking to raise at least €1 billion in a rights issue within the next six to eight weeks. Moving the financial year-end facilitates this and gives the bank greater flexibility.

Davy stockbrokers said in a report published this month that Bank of Ireland could raise between €1 billion and €1.2 billion in a rights issue underwritten by the Government. Some of the State’s €3.5 billion investment may be repaid from the issue, it said.

One downside is that the bank must take losses incurred in selling loans at a discount to the National Asset Management Agency (Nama) in one financial year, as opposed to spreading them over two. It must now take the full hit in 2010.

Mr Callaghan said that, given the bank would have to recapitalise this year, this was less relevant.

Before launching the rights issue, the bank is expected to require further clarity on the losses incurred by transferring loans into Nama and EU approval for its restructuring plan, which is expected in the coming weeks.

The transfer of the top-10 borrowers on the bank’s development loan book was expected to have been completed by February 12th.

However, this was pushed back and the loans are now expected to be ready for transfer by February 26th.