Bank Balanced By 'State-Ownership'

An iconic Irish bank that has 44 branches in Northern Ireland and runs a lucrative financial services joint venture with the British Post Office is in the news today, as share values tumble.

The Irish Government has been 'buying into' the Bank of Ireland and has now acquired a 15% share in the bank.

But while worth €250m, this is said to be "diluting existing shareholders in the bank" as the Irish State has been issued with 184m shares in the institution.

Last year, the Irish State invested €3.5bn in the bank as part of its plans to rescue the banking system as Ireland was hit by deep recession.

But, in return, the bank was to pay an annual dividend of 8%. However, the EU blocked banks in receipt of State aid from making such payments because such payments would amount to a direct transfer of money from the State to private investors.

This meant the bank had to give the Irish government shares despite that fact it had hoped for cash.

The share price for the bank is now just €1.26, down from a high of €18 at the height of the Irish boom.

Raising €250m meant giving the Irish Government a 15% stake in the bank.

But Irish Finance Minister Brian Lenihan said he would be reluctant to nationalise the banks, but that the Republic of Ireland needed a viable banking system.

In November, the bank announced losses of almost €1bn euros (£895m) for the six months to the end of September.

It said those six months had been "difficult" but it remained committed to the UK market and will continue its partnership with the Post Office.

(BMcC/GK)