AIB Recapitalisation Plans (Asset Selling Rant)

noodler

Okay this is hardly an original complaint but AIB gave a few sparse details on their plans to raise capital (full plan announced in September) yesterday.

They have to sell off some of their more profitable assets such as a stake in M&T Bank, AIB assets in the UK but also their stake in Polish bank Zachodni.

I know the taxpayer would cringe at putting more money into the banks but how perverse does it seem to sell off an asset (Zachodni) which is so profitable for the bank? Surely this is one of the investments, as opposed to a plethora of others, which the Government should be making?

As in, provide AIB with whatever cash they would get from selling that bank (in the form of a loan) and then the bank could pay some of said cash back per year whilst keeping hold of the asset in 10 years time or whenever the loan repayments are completed.

I am all for what the new regulator has done, and promised to do, since arriving but surely this is one of those issues that requires a little flexibility as it makes financial sense overall?

Stabshauptmann

A)Because the value of that investment can go down as well as up
B)Because there is a finite amount of money available. We cannot invest in everyting. Thats money we need now for hospitals and gardaí wages

noodler

Stabshauptmann wrote: »

A)Because the value of that investment can go down as well as up

In the long run we are all dead etc. It is a very profitable entity and has the ability to help recapitalise AIB without a net Government loss.

Stabshauptmann wrote: »

B)Because there is a finite amount of money available. We cannot invest in everyting. Thats money we need now for hospitals and gardaí wages

That is a very, very narrow response - very tabloid like if you will forgive me saying so. You make it sound like my argument was based on some personal stake in AIB rather than the public interest.

Lending this money, unlike the billions poured into Anlgo (as eurostat have said), would actually be an investment i.e. there would be hope of the public getting a return.

Stabshauptmann

noodler wrote: »

In the long run we are all dead etc. It is a very profitable entity and has the ability to help recapitalise AIB without a net Government loss.

You dont know that the investment wouldnt make a loss. Whats the old expression, as safe as houses?

Profitable or not, AIB needs cash now.

That is a very, very narrow response - very tabloid like if you will forgive me saying so.

I wont tbh, because your whole premise is narrow and tabloid.
There is a finite amount of money, they cant just print more.

The government cant afford to make any unnecessary investments at the moment. Nor does it owe AIB any favours. If they can get out of this mess through selling assets, sell the damn assets.

You make it sound like my argument was based on some personal stake in AIB rather than the public interest.

Keeping AIB afloat is in the public interest. Doing it with the smallest possible government investment and exposure is in the public interest. Giving them a loan so they dont have to sell an asset instead isnt in the public interest, its in AIB's interest.

Lending this money, unlike the billions poured into Anlgo (as eurostat have said), would actually be an investment i.e. there would be hope of the public getting a return.

But it is unnecessary risk, and an unnecessary expenditure.

noodler

Look, billions have been pumped into the banks because they have been deemed of systemic importance.

This include €22.3bn for Anglo which we will never get back.

That would be a bad investment.

Making AIB sell one of their most profitable investments, when we are remember bailing them out because we deem them to be of systemic importance, seems a little short-sighted.

In AIB's interest? Not entirely sure you have grasped the supposed concept of the bailout.

Leaving AIB with a performing asset or two goes hand in hand with ensuring a healthy bank system.

Pumping €22.3bn into a bank we will never get a return from? - Fine.
Sparing a a billion or two for an asset which could make the state a return? - No way that is a step too far.

Regarding your finite money concept, I assume you know we don't actually have any of this money we are pumping in right?

Stabshauptmann

noodler wrote: »

Look, billions have been pumped into the banks because they have been deemed of systemic importance.

This include €22.3bn for Anglo which we will never get back.

That would be a bad investment.

Making AIB sell one of their most profitable investments, when we are remember bailing them out because we deem them to be of systemic importance, seems a little short-sighted.

No, it seems your understanding is pityful and your stubborness amazing.

We cannot afford the bailout. Our economy is crumbling, our deficit is beyond EU limits and our soverign debt rating is soaring. We are sailing close to the brink, and its taken a lot to keep us from being an Iceland or Greece.

The money we spent and continue to spend on Anglo is not in any way relevant to AIB. Anglo has been nationalised, it was costly, and possibly unnecessary, but it is illogical and idiotic to use it as an argument for investing in a Polish bank.

Heres what you are saying. The Gov made a bad investment in Anglo. The investment is so bad it is being written off completely. We should invest in AIB / Zachodni instead.

There is no logical link in that statement.

We do need to keep AIB afloat. But given our dire financial circumstances we need to do it in the cheapest way possible. It is cheaper to let AIB raise their own capital than to lend / invest in them. It may be a profitable investment, but we dont have the working capital to pull it off.

In AIB's interest? Not entirely sure you have grasped the supposed concept of the bailout.

Leaving AIB with a performing asset or two goes hand in hand with ensuring a healthy bank system.

A) Its not their only asset
AIB was given the choice of raising its own capital or taking a state investment. It chose the former. I think it knows its business better than you, random internet punter.

Pumping €22.3bn into a bank we will never get a return from? - Fine.
Sparing a a billion or two for an asset which could make the state a return? - No way that is a step too far.

A billion or two, sure thats that in the grand scheme of things :rolleyes:
Vincents closed 20 beds this week. You have no idea what 1 or 2 billion is in the real world.

Regarding your finite money concept, I assume you know we don't actually have any of this money we are pumping in right?

I know we dont physically have cash. And I know we borrow funds. But I do know that there is actually a finite amount of wealth. It can be leveraged and manipulated but there is a limit. If you think otherwise you are a nutter. Why would we ever want for anything if it were otherwise :rolleyes:

noodler

Unbelievable.

The more I read the more I wonder if you understand anything I wrote.

Well, I find it funny when people don't understand certain points fully yet still get abusive in their retorts so I will just wait to see if anybody else has anything worthwhile to say on the subject.

Seriously though, I have never read such "be Jaysus why r we givin the banks all are monie" crap on this forum before.

The_Minister

[Modhat]
Stabshauptmann please be civil when debating with other posters. Noodler is making a valid point (whether he is right or not is irrelevant), in a calm way, and nothing he said was so outrageous as to require that insulting post.
[/Modhat]

Scarab80

Can i point out that AIB probably has no choice in selling off Zachodni.

Under EU rules the more money the state invests in a private company the smaller that company must become, this is to prevent EU governments subsidising private companies. These EU rules are also affecting the payments on the governments preference share investments.

I don't think AIB have released their EU restructuring plan yet but BOI have. They are required to sell off New Ireland Assurance, Bank of Ireland Asset Managment, ICS Building Society and some other smaller holdings.

At least the fact that Zachodni is profitable means that AIB will realise a nice profit on disposal.

noodler

Oh sure, I don't think it is any secret that they are doing so reluctantly.

"I think the CE actually said It kills me to sell Bank Zachodni; it’s a phenomenal business. But, we don’t have an option. If we don’t sell, the €7bn will have to come from Government and that would wipe out our shareholder base and wouldn’t be fair on taxpayers."

Scarab80

But even if the government did pay the 7bn they would still have to sell to reduce size in accordance with EU rules.

noodler

Yes, the debate here is whether or not selling produtive assets to prop up unproductive ones is the best way to go about this in the medium to long run.

I am not suggesting it is the state who is forcing them to do it or anything.

suckslikeafox

I'm with the OP on this one.

I just don't see the point of selling a profitable and well-regarded asset (we know its well regarded by the apparent interest its going to generate for a sale) just to avoid a few extra % of government control.