Private investors buy into Bank of Ireland

The government had been widely expected to take control of Bank of Ireland, the last domestic lender outside of state ownership, after it agreed to underwrite a rights issue, the results of which are due today.

However after the sale and rights issue the government will have a maximum 32 per cent in the bank while new investors will hold between 14 and 37 per cent, the finance ministry said.

Finance Minister Michael Noonan said: “It has been recited far and wide that it is impossible for Ireland to get money on the markets.

“Now we have significant private sector investors prepared to put money into Bank of Ireland and that’s a strong signal internationally.”

It is the second significant boost for the Irish government after European partners last week agreed to cut the rate it is charging for a multi-billion euro bailout by 2 percentage points, a change the government says could save it up to 1bn euros per year.

Dublin, which has closed two of its six domestic lenders, merged another two state-controlled institutions and will soon take over a fifth. It has put a 70bn-euro price on drawing a line under its banking crisis after stress tests in March. Bank of Ireland was told to raise 4.2bn euros in additional core tier one capital following stress tests in March. The tests were required under the terms of the 85bn euro EU-IMF bailout Ireland received late last year.

The state has shrunk the bill for bailing out its banks by around five billion euros by sharing losses with subordinated debt holders.

Bank of Ireland managed to raise 1.96bn euros by hitting junior bond holders with losses of up to 90 per cent.