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Sunday 25 September 2016

AIB looks at turning huge loan into shares

banking

AIB bailout loans could be converted into shares in the bank and ultimately offered to the public along with the rest of the stock.

A possible conversion of a €3.5bn state bailout loan into ordinary shares in AIB is under discussion as part of a move to overhaul the capital structure ahead of a possible sale.

Talks are under way between the Government and AIB on an appropriate capital structure, and are focused on options in relation to the €3.5bn of so-called preference shares - a type of loan - including possibly converting some or all of the debt into bank shares, AIB chairman Richard Pym said.

Speaking at the bank's annual general meeting at its headquarters in Ballsbridge, he said talks are also focused on €1.6bn of contingent capital notes - a separate debt owed to taxpayers - and consolidation of the bank's massive half-a-trillion of existing shares.

He gave no update on the timeline for any sale.

Mr Pym said the bank is still considering a cut in the interest rate charged on standard variable rate home loans, though he gave no further insight into when that could happen.

AIB chief executive David Duffy last week indicated a rate cut could happen by the middle of the year. Mr Pym said AIB was the first bank to reduce standard variable rates at the end of last year.

He told shareholders that AIB loses money on repossessions. The rate of arrears on Irish home loans declined 22pc at the bank last year, he added.

But, in an indication of a toughening stance on long-term arrears, he said the bank cannot spend taxpayers' money when customers will not cooperate.

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