Allied Irish Bank is to seek a further €1.5bn capital injection to strengthen its balance sheet bringing its total proposed recapitalisation to €5bn by the end of this year.
The Irish bank said in a Stock Exchange announcement today that: 'In cooperation with AIB, the minister for finance has been conducting due diligence and stress test scenarios.
Arising from these stress tests the minister for finance and AIB have formed a view that to strengthen our capital position a total amount of €5bn new core tier 1 capital is appropriate.’
It said potential sources of this capital include the ‘disposal of assets and marketable assets will be considered as part of this process’.
‘This commitment represents a reappraisal of our previous view in relation to asset disposal. The bank acknowledges that the minister has said that if any further capital injections are required from the State these would be in the form of equity capital,’ said AIB.
In February AIB reached an agreement with the Irish government to carry out a €3.5bn recapitalisation of the bank.
It said: 'Since then, market and public uncertainty about our capital adequacy has persisted despite the proposed addition of €3.5bn in core tier 1 capital.
'As previously announced, we will be seeking shareholder approval at an EGM on 13 May to accept the aforementioned capital.
'Furthermore following discussions with the minister for finance and reflecting his desire to ensure that systemically important banks would remain adequately capitalised, even in stressed scenarios, we have decided to take further action to strengthen our capital position.'
‘We also wish to state our support for what we believe is a positive step taken by the government in its recent decision to create a National Asset Management Agency (NAMA) and AIB wishes to signal its intention to participate in this initiative.
'NAMA is currently at an initial planning stage. AIB will work closely with the authorities to achieve its implementation.’