BANK OF Ireland will incur expenses of €150 million from its latest capital raising exercise, which aims to generate funding of €5.2 billion to allow it to meet new regulatory requirements on its capital ratios.
This emerged on Saturday from the publication of a 288-page prospectus outlining the details of the capital raising.
The document reveals that the bank has agreed with the Irish Stock Exchange that it will seek shareholder approval to delist from the main market if less than 25 per cent of its shares are held in public hands following the completion of its rights issue.
The prospectus also states that a 15 per cent stake of the equity has potentially been set aside for the Government – via the National Pensions Reserve Fund.
This will involve the issue of €794.9 million in new shares to the State. This is being done to facilitate the possible sale of a stake in the bank to a private equity buyer.
The prospectus states that Bank of Ireland “continues to have active discussions with other sources of private capital” but to date the only certainty it has on funding is from the State, which has agreed to underwrite a rights issue.
Bank of Ireland is seeking to generate €4.2 billion (excluding expenses) in core Tier 1 capital and €1 billion in contingent capital by a regulatory deadline of July 31st.
The bank is seeking to raise a minimum of €2.12 billion from debt-for-equity offers and burden sharing with subordinated bondholders. This is already in train.
It plans to raise a maximum of €2.23 billion from a State placing, if any, and the rights issue. The State will also provide €1 billion in contingent capital.
The bank has agreed to pay a range of fees to the State for its support. These include an underwriting fee of 4 per cent of the gross proceeds of the rights issue; a placing fee of 1.5 per cent of the gross proceeds of the State placing; a corporate finance fee of €3 million; and €15 million relating to the contingent capital instrument.
The prospectus provides up-to-date information on the bank’s loans and deposits. By June 16th, the overall volume of loans had reduced by 4 per cent from €114 billion at the end of 2010.
Customer deposits had risen by about 1 per cent from €65 billion at the end of December. This has resulted in its loan-to-deposit ratio improving by about 10 percentage points from 175 per cent at the end of last year, while its wholesale funding declined by 10 per cent from €70 billion. Its net drawings from monetary authorities and other liquidity facilities provided by the Central Bank also fell.
By June 16th, the National Asset Management Agency was still carrying out due diligence on €1.9 billion of loans transferred by Bank of Ireland.
“As a result, there is continuing uncertainty around the final consideration to be paid by Nama for these loans,” the document states.
The bank expects its cost-to-income ratio to fall below 50 per cent in the year to the end of December 2014 as a result of reductions in its overheads.
