CIBC - - Canadian Imperial Bank of Commerce - - has been named as the Canadian bank interested in buying a stake in the biggest Irish bank AIB.
AIB said earlier today in a statement: "Allied Irish Banks, p.l.c. (“AIB”) [NYSE: AIB] notes the recent press comment regarding interest from a third party taking a minority stake in the Group and confirms that it has received such interest. However any discussions with regard to this matter are preliminary and are not expected to progress in the near term, at least until there is greater clarity on NAMA among other issues. There can be no certainty that these discussions will lead to a proposal to invest in the Group or a transaction being concluded."
CIBC has 40,000 employees worldwide and more than 1,000 branches across Canada.
AIB has a 24% stake in a US based-bank M&T, which could be of interest besides a potential foothold in Europe.
“It’s a much longer-term thing. I don’t think they’re going to be moving quickly until they see the full extent of NAMA. They want to take an equity interest. We deem this to be of a lot higher standard than other approaches,” a source told the Irish Times.
Simply, interest depends on the transfer of toxic property loans to the planned State 'bad bank" NAMA (National Assets Management Agency).
On Thursday, analysts of RBC Capital Markets, a unit of RBC - - Royal Bank of Canada -- Canada's biggest bank, cut their ratings on AIB and Bank of Ireland lower tier 2 and tier 1 debt to “underperform” from “sector perform”.
“Earnings power is in atrophy and free capital to unsecured debt holders is low to non-existent,” the analysts said.
The analysts said the Irish banks are in a “vegetative state” surviving on European Central Bank "life support" and facing a “debt wall of worry”.
The research note said banks are likely to use money from NAMA to pay back the ECB and will not be in a position to lend to businesses from between nine and 14 years, they added.
“The NAMA proposal alone is insufficient to address the business model challenges facing the bank,” the analysts wrote. “Nationalisation could keep the ECB in the game and allow more liquidity to remain in Ireland.”
The banks now have “low to no” free capital available to protect unsecured debt holders, while earnings are falling “to the point of business model atrophy,” RBC analysts Hank Calenti and Alastair Whitfield in London said.
“In light of the recent business franchise impairment, likely atrophy going forward and deposit outflows, we question the going-concern endurance of the banks,” the analysts said. “The ECB appears to be acting as the lender of last resort for the Irish banks as their funding models have collapsed.”
The Government already owns 25% of Bank of Ireland and 25% of AIB in preference shares.
Bank of Ireland said today it has “recently seen preliminary signs” of better liquidity conditions in international markets.
The creation of the government’s National Asset Management Agency (NAMA) and the extension of a State guarantee for some bonds “should result in further improvements in liquidity conditions for Bank of Ireland,” it said in a statement.
