Dan White: Expensive, but we were just days away from a calamitous run on AIB
This morning's announcement that the Government is to take a majority stake in AIB marks the greatest humiliation in the bank's 44-year history.
With its chairman and managing director clearing their desks, the new AIB will be a far humbler organisation than the arrogant colossus of the Celtic Tiger era.
How the mighty have fallen. Announcing AIB's half-year results two years ago the then chief executive Eugene Sheehy said he would rather "die" than issue fresh shares that would dilute existing shareholders.
What a difference two years makes. Sheehy has long since departed and now his successor, "managing director" Colm Doherty, is getting his P45 too. Chairman Dan O'Connor, whose tenure in office was a severe disappointment to all of us who held high hopes for the former Woodchester and GE Money boss, is also leaving AIB.
At the root of AIB's problems are escalating bad debts. It has taken a 45pc write-down on the €6bn of bad loans it has already transferred to NAMA. The Government now reckons that it will have write off a massive 60pc of the remaining €13.5bn of loans it transfers to NAMA.
What this means is that AIB will have to raise €3bn more than the €7.4bn of fresh capital which the Financial Regulator ordered it to raise earlier this year. With its share price now down to just 50c there isn't a hope in hell that this money could come from private investors.
This means that AIB has had to go cap in hand to the state once again. Last year the Government injected €3.5bn into AIB when it purchased preference shares. Earlier this year the State received an 18pc shareholding in AIB when the EU banned it from paying a cash dividend on these preference shares and the state received ordinary, i.e. voting, shares instead.
The Financial Regulator now estimates that, even after clearing a net €2.5bn from the sale of its Polish subsidiary, AIB needs to issue €3.7bn worth of new shares.
This will massively dilute the existing AIB shareholders leaving the State with a minimum 70pc - and as much as 90pc -stake in AIB. A feature of the Irish banking crisis has been the way in which AIB, dubbed "arrogant" Irish Bank by some of its critics, has completely mismanaged its relationship with the State.
Unlike its rival Bank of Ireland, it has consistently managed to get on the wrong side of politicians, officials and regulators.
Now official Ireland is wreaking its revenge. Last year the AIB board defied the Government by appointing insider Doherty to succeed Eugene Sheehy. Bad move. Now there is to be a complete clear-out at AIB. And not a minute too soon.
As fears mounted about the stability of the Irish banking system over the past few weeks it wasn't Anglo but AIB that was causing the greatest concern.
Bad and all as they are, Anglo's problems were already well known. No, it was the steadily worsening situation at AIB and the growing feeling that the bank's management and board were still in denial about the true extent of its likely loan losses that caused investors to dump Irish Government bonds and bank shares.
We were, not to put too fine a point on it, weeks, perhaps just days, away from a "run" on AIB. This morning's moves, expensive though they are to the exchequer, at least spare us from such a calamity.