Business

Goldman Sachs To Advise On Options For Allied Irish Banks

The Irish government announced Monday the appointment of Goldman Sachs Group to advise on potential capital restructuring at Allied Irish Banks, once the country’s largest High Street lender.

Allied Irish Banks was nationalized in 2010 as numerous Irish financial institutions collapsed after the bursting of a property bubble, and its failure cost taxpayers €21 billion.

Allied Irish Banks

Significant progress by Allied Irish Banks

Allied Irish Banks was the second-largest failure among Irish banks in 2010, only behind that of Anglo Irish Bank, which cost €34 billion and is now in liquidation. AIB remains a functioning bank, though it has streamlined and shed assets, including a successful business in Poland.

According to a Gallup survey, though Spain and Ireland exited their bailout programs at close to the same time, Spanish opinions of banks has dropped since 2013, while attitudes towards banks has risen in Ireland, moving from 15% confidence level in 2013 to 29% confidence level in 2014. A recent Moody’s report highlighted that Irish banks are showing the most potential to improve heading into 2015 largely due to economic growth in the country.

In a statement unveiled Monday, Michael Noonan, the Irish Finance Minister said: “Given the significant progress made by A.I.B. in 2014 and the expectations for 2015, my officials are engaged in discussions with the bank’s management team to explore how best to reconfigure the bank’s capital structure to make it fit for purpose and agree on a road map that will see the bank begin to return cash to the state”.

A big theme in Irish banking

The latest announcement by the Irish government suggests that the government wants to push ahead as quickly as possible with the sale of a stake in Allied Irish Banks, by tapping the growing investor appetite for Irish assets.

Vincent Boland of Financial Times points out that the Irish government’s move to reverse the state’s involvement in Allied Irish Banks will be the big theme in Irish banking in 2015. The Irish government has already trimmed its stake in Bank of Ireland with a sale to U.S. investors and has also sold Irish Life, the insurance and pensions group. However, it is felt Allied Irish Banks will be a tougher test of investors’ appetite for Irish financial stocks, as it struggles to reassert its once dominant position in Irish banking.

The Irish Finance Ministry indicated that naming Goldman Sachs doesn’t necessarily imply the state will sell shares in Allied Irish Banks in 2015 as a “considerable amount of work” remains to be done on the lender’s capital structure. However, the finance minister said: “I am confident that over time we will at a minimum fully recover the funds that this government invested in Allied Irish Banks, Bank of Ireland and Permanent TSB (IPM)”