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First Trust sale bid put ‘on hold’ by AIB

Terms for the proposed sale of First Trust and Allied Irish Banks (Great Britain) have been “put on hold”, it has emerged.

AIB’s new executive chairman David Hodgkinson revealed the shift after his first major speech, in which he acknowledged that shareholders of the beleaguered bank had suffered “enormous erosion” in the value of their shares, causing “real hardship”.

Following the egm in Dublin, Mr Hodgkinson said that while AIB (Great Britain) is still for sale, the initial terms of sale are “on hold”.

There is now speculation that the shift could signify a deal where the UK package is split, with First Trust retained by AIB in Northern Ireland.

Economist John Simpson said if offers had been made to buy First Trust since its proposed sale was announced in April, “the price may not be right” for AIB.

“Basically it could be that they have not got a good enough offer and are having to repackage AIB (Great Britain) to make it more worthwhile to potential buyers,” he said.

“The best-case scenario is that AIB (Great Britain) could be split into several businesses and AIB may be as well to hang on to First Trust in Northern Ireland.

“All the other main banks operate both north and south of the border, so why can’t First Trust?”

In March, the Republic’s Financial Regulator undertook a review which identified a requirement for AIB to generate €7.4bn (£6.4bn) in additional capital by the end of the year.

And in a move to raise the capital, the bank said it would sell First Trust, which employs 1,300 people in 48 branches in Northern Ireland, and put AIB (Great Britain) up for sale.

But last month it was announced AIB would require an extra €3bn (£2.6m) of government money to avoid collapse, bringing the cost of bailing out the institution to €34bn (£29.4m) and effectively nationalising the institution.

A spokesman for the Irish Bank Officials’ Association welcomed the possibility of a stay of execution for First Trust. “We have been lobbying AIB for some time to reverse this decision to dispose of the UK wing of their operation and this could be a glimmer of hope on the horizon,” he said. “We have always seen this sale as unnecessary and what we deem as flawed logic. The whole UK wing including First Trust at this time would not be an attractive market concern and would not command the high figures it once may have done.”

“We must also bear in mind that the sale was to help prevent nationalisation, when almost 90% of AIB is now owned by the Irish state — so why continue with this part of the sale?

“The sale of the UK wing would reduce the AIB to nothing more than a provincial bank in a very small corner of Europe.”

The bank’s proposed disposal of its shareholding in the American M&T Bank Corporation was also discussed at the egm, a move expected to raise just short of €900m (£780m).

AIB shares have plummeted from a peak of €23 four years ago to €0.34.

Belfast Telegraph