Allied Irish to suspend dividends

 

Allied Irish Banks (AIB) said on Tuesday it would suspend interest payments on its shares and some bonds due to a European clampdown on banks that took state help, and aimed to make payments retrospectively.

European Commission competition authorities have stopped several banks, including Royal Bank of Scotland, from paying dividends on some securities as a condition of the state aid they have received.

Part-nationalised AIB said on Tuesday it would not pay coupon payments on its Tier 1 and Tier 2 capital instruments, which were payable on December 14.

That will trigger a "dividend stopper" for a period of one year, which prevents the bank paying a dividend on ordinary shares, 3.5 billion euros (3.2 billion pounds) of preference shares owned by the government and some other capital instruments.

That would require AIB to issue the government with shares to make up for the dividend on preference shares due on May 13, although that would be inconsistent with the Irish government's objective of not taking a majority stake.

AIB said it and the Irish government were in talks with Brussels, including potentially allowing the bank to resume payments, including the retrospective payment of the bond coupon payment due on December 14, which would allow it to pay a cash dividend on the preference shares.

"The EC has confirmed to AIB and the Department of Finance that, without prejudice to the outcome of its review of the restructuring plan, it is open, in arriving at its final decision to giving full consideration to the approach outlined above" AIB said.