MINISTER FOR Finance Brian Lenihan will announce on Tuesday the capital required across the five lenders participating in the National Asset Management Agency (Nama) and the full scale of State ownership in the two main banks, AIB and Bank of Ireland.
The final bill for further capital facing the five institutions could be as much as €16 billion, although part could be raised privately.
The recapitalisation of the banks will be determined by the losses taken on Nama loans, the Financial Regulator’s estimate of stress-case losses on non-Nama loans, and the ability of the two big banks to raise private capital.
The regulator is expected to base the final cash injections required on the banks’ ability to reach a core equity ratio of 7 per cent – a measure of loss-absorbing capital – by the end of this year.
The capital shortfall left after the Nama losses and estimated non-Nama loan losses will be met by the Government after the regulator’s assessment of how much the banks can raise privately.
The State may end up taking a larger minority share in BoI and a majority stake in AIB to reach the 7 per cent ratio if the regulator and Government view the capital requirements for each as being too large and that they cannot raise sufficient capital on their own.
AIB would require about €3.4 billion and Bank of Ireland about €1.7 billion to reach 7 per cent core equity ratio, according to banking analyst Sebastian Orsi at Merrion Stockbrokers.
Next week will mark one of the most momentous weeks for the Irish banking sector as a series of choreographed announcements will reveal the full scale of State ownership in the banking sector.
“We are into the endgame now,” said another analyst.