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Bank of Ireland is to undertake a corporate reorganisation that will see a big reduction in the number of shares it has issued as well as a change of name for its listed entity as it moves to comply with new European banking regulations.
The bank said on Friday it would convert to a holding company structure from July pending court approval for the reorganisation.
The conversion means it will exchange one new share in the new holding company – Bank of Ireland Group PLC – for every 30 shares in the current listed entity, which is known officially as the Governor and Company of the Bank of Ireland.
The move is largely technical, but will consolidate the group’s capital structure and lift its share price from Friday’s trading level of €0.23 to around €7. The bank has more than 32bn shares outstanding; its market capitalisation is €7.6bn.
The huge number of shares outstanding reflects capital injections by the state and outside investors during Ireland’s financial crisis, which began in 2008 and heavily diluted existing shareholders. The Irish state still owns a stake of about 13 per cent in the bank, which has paid back the bail-out money
“The directors believe that a consolidation of the issued share capital of the Bank would position the share price in a range that is more appropriate to the size of the Group and may assist in reducing share price volatility,” the bank said in a statement to the stock exchange.
The bank previously announced that the reorganisation “may adversely impact” its reported total capital and tier 1 capital ratios as it is forced to stop counting a proportion of subordinated debt on its balance sheet. However, it added today that “whilst a certain amount of these capital instruments will not count towards the calculation of the group’s regulatory capital going forward, the instruments remain available to absorb losses”.
Richie Boucher, Bank of Ireland’s chief executive, announced in March that he would step down later this year after eight years at the helm.