Allied Irish transfers 9 billion euros to "bad bank"

DUBLIN (BestGrowthStock) – Allied Irish Banks (AIB) has transferred property loans worth 9.3 billion euros ($12.24 billion) at a discount of 59 percent to a state-run “bad bank,” the lender said on Monday.

AIB has now transferred more than 18 billion euros in loans and associated collateral to the National Asset Management Agency (NAMA), the bulk of them at a discount of around 60 percent, forcing it to seek fresh capital to bulk up its balance sheet.

Ireland’s government is expected to effectively nationalise AIB, once the country’s largest listed lender, before the end of the year as part of an 85 billion euros EU/IMF bailout package that requires Dublin to overhaul its financial sector.

Under the bailout, NAMA will take over an additional 16 billion euros in land and development loans from AIB and Bank of Ireland after it removed a 20 million euros threshold on individual loans.

The loans transferred on Monday were taken out by 217 customers.

Glas Securities has estimated that AIB will transfer an additional 11-12 billion euros in loans to NAMA by the end of March with a discount of about 60 percent.

Years of reckless lending during a property bubble have brought the Irish economy to its knees and raised concerns about contagion across the euro-zone.

Ireland’s lenders are dependent on funding from the European Central Bank and their own central bank after being frozen out of wholesale funding markets and have suffered large corporate deposit withdrawals amid uncertainty about their future.

AIB needs to raise nearly 10 billion euros to boost its Core Tier 1 capital, a measure of financial strength, by the end of February.

The government wants it to raise its Core Tier 1 capital ratio to 8 percent by the end of this year and will inject capital to meet that threshold.

(Reporting by Carmel Crimmins. Editing by Jane Merriman)

Allied Irish transfers 9 billion euros to "bad bank"