No more capital needed for Bank of Ireland

FUNDING:BANK OF Ireland provided a small silver lining amid yesterday's doom and gloom, with the announcement by the Minister for Finance the bank would not need further capital from the State despite the announcement it may have to take a higher discount of up to 42 per cent on its Nama-bound loans.

The confirmation that the Government would not exceed its 36 per cent holding means Bank of Ireland is the only institution participating in Nama not majority State-owned. It and Irish Life Permanent are the two Irish institutions still outside State control.

Also of relevance to Bank of Ireland was the announcement that the threshold on the individual development loans to be transferred from Bank of Ireland and from AIB to Nama will be increased from €5 million to €20 million. This will have no material effect on the bank or its borrowers, Bank of Ireland said.

Yesterday, it was announced that all remaining Nama transfers from Bank of Ireland would be completed in one single tranche and the final overall discount on the remaining loans would be up to 42 per cent.

The 42 per cent discount represents a haircut of up to €2.67 billion on loans with a book value of €6.35 billion.

The bank said the decision to change the threshold means the total loans potentially transferred to Nama will not exceed €10.1 billion in book value compared to the previous estimate of €12.2 billion.

However, it will have no impact on the bank’s financial position as Bank of Ireland has raised capital in excess of its requirements.

Bank of Ireland’s share price climbed steadily yesterday, closing up 8.8 per cent at €0.62.

Separately, it is understood the bank will not now proceed with the sale of its 17 per cent stake in the Irish Credit Bureau, part of its restructuring plan submitted to the European Commission. As reported in today’s Irish Times, the Irish Credit Bureau, which was put up for sale in March, has withdrawn from the sales process.