AIB urged to ditch First Trust sale plan
Published 01/10/2010 | 08:00
Allied Irish Banks (AIB) must abandon its plan to sell First Trust in light of AIB's bailout by the Irish state, a bankers' trade union said.
Larry Broderick, general secretary of the Irish Bank Officials Association (IBOA), said the state's injection of capital into AIB should alter what he said was AIB's policy of disposing of "prized assets" to avoid state ownership.
On a day dubbed Black Thursday, the Republic's Finance Minister Brian Lenihan yesterday announced AIB would require an extra €3bn of Government money to avoid collapse .
He said, meanwhile, that the cost of bailing out the beleaguered Anglo Irish Bank could rise to €34bn.
Mr Broderick said the union wanted a meeting with Mr Lenihan and the bank's board to discuss how the bailout might affect AIB's sale strategy.
In April the bank announced it was selling First Trust, which employs 1,300 people in 48 branches.
It also announced that it was putting its AIB (Great Britain) up for sale in a bid to raise €7.4bn to rebuild its balance sheet and avoid nationalisation.
Mr Broderick said the sale of First Trust would leave AIB a "much reduced insitution" devoid of a northern presence.
That would leave it at a "significant disadvantage to its main competitors - Bank of Ireland and Ulster Bank - which will both maintain a significant presence in Northern Ireland and Britain.
"The bank should now reconsider its disposal strategy before any more assets are sold - and especially the plan to sell off First Trust Bank in Northern Ireland and Allied Irish Bank (GB).
"It makes even less commercial sense now than it did when first announced at the beginning of the summer," he commented.
He said a smaller AIB - shorn of First Trust - would make a poorer return for the state, once it effectively became the bank's majority shareholder.
Meanwhile, bank customers in the Republic were assured that savings in AIB, Anglo Irish Bank and Irish Nationwide, which is receiving €2.7bn - were safe following the massive rescue.
But consumer groups predicted that the state's effective takeover of AIB, the need to put more funding into Anglo Irish and building societies Irish Nationwide and EBS, would mean branch closures and higher lending costs.
Consumers' Association vice-chairman Michael Kilcoyne said it was inevitable that AIB would be forced to shut branches as it attempts to return to profitability to escape state ownership.
Mr Kilcoyne said layoffs were highly likely.
"There will be a big rationalisation at AIB," he said.
Markets were jittery ahead of the announcement yesterday and confirmation that the Irish state would have a majority holding in AIB sent its stock plummeting by up to 30% before it was resuscitated in later trading but remained on life support.
The ISEQ Overall Index initially rose, dipped, climbed again, and fell once more during the day, finishing the session on what was a momentous day up just 19.10 points, or under 1% at 2,676.18.