22nd December 2008

Allied Irish Banks, p.l.c. (“AIB”) [NYSE: AIB] is issuing the following announcement on reaching an agreement with the Irish Government that will significantly increase the bank's core tier one capital ratio. This agreement is subject to shareholder, regulatory and EU Commission State aid approval. The key terms and conditions are outlined in a statement issued yesterday, the 21st of December, by the Minister for Finance which refers to the recapitalisation of Irish banks

Our decision to accept the Government's offer of €2billion for an issue by AIB of perpetual preference shares was taken following detailed discussions between both parties. We have consistently stated, including in our interim management statement (IMS) of the 5th of November 2008, that our capital position is good. We are mindful though of the growing market expectation for banks everywhere to have higher capital levels, a factor also acknowledged in our IMS.

 

Protection of the rights and interests of our investors is key to our consideration and discussions with the Government. The agreement reached satisfies that crucial requirement for the following reasons. The preference shares will have a fixed coupon of 8%, will be non - convertible, redeemable, rank alongside ordinary equity and will qualify as core tier one capital. There are no restrictions on payment of dividends on ordinary shares that we consider onerous. Voting rights and appointments of directors requirements as outlined in the Minister's statement can also be accommodated. It is agreed that these requirements would end on redemption by us of the preference shares. We estimate that the acceptance of this additional €2bn will increase our proforma core tier one capital to close to 7.5% at the end of 2008.

 

We acknowledge and are grateful to the Government for the commercial approach it has adopted that has enabled us to reach this agreement. In relation to the Government's commitment to underwrite and otherwise support the raising of additional core tier one capital, we have indicated our interest in seeking up to a further €1bn from our shareholders. Our endeavours will be strongly influenced by our analysis of market conditions and the pre-emption rights of our shareholders. As previously stated, we have the capacity to improve our capital position through asset disposal. The raising of an additional €1bn would increase our core tier one capital ratio to an estimated proforma level of between 8% and 8.5% at the end of 2008.

 

Eugene Sheehy, John O’Donnell and Alan Kelly will host a conference call for analysts and investors today at 09.00 GMT

 

CONFERENCE CALL DIAL-IN DETAILS:

Please dial in 5 to 10 minutes prior to start time

 

Title: AIB agrees capital measures – access code 653816

 

Republic of Ireland	+353 (0) 1 247 6150
UK	+44 (0) 20 7111 1258

 

Replay facility available until midnight 4th January 2009 – access code 653816

Republic of Ireland	+353 (0) 1 659 8321
UK	+44 (0) 20 7806 1970
USA	+1 718 354 1112

 

 

-ENDS-

 

For further information please contact:

Alan Kelly
General Manager, Group Finance
AIB Group
Bankcentre
Ballsbridge
Dublin 4
Tel: +353-1-6600311 Ext 12162

or

Catherine Burke
Head of Group Corporate Relations
AIB Group
Bankcentre
Ballsbridge
Dublin 4
Tel: +353-1-6600311 Ext 13894

About AIB

AIB Group is Irelands leading banking and financial services organisation. It operates principally in Ireland, Britain, the USA and Poland.

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