Allied Irish shares up, capital plan seen advancing

DUBLIN, June 28 (Reuters) - Shares in Allied Irish Banks rose on Monday after reports that its fundraising was making headway, with a back-up plan to offload its stake in M&T Bank Corp and the sale of its Polish unit on track.

Allied Irish's shares were up 4.9 percent at 1.017 euros by 0905 GMT, outperforming a 1 percent higher Stoxx Europe 600 banking sector index.

'Things are progressing along for Allied Irish in relation to raising capital,' one Dublin-based trader said.

The Sunday Times newspaper said Allied Irish was planning an institutional placing of its 22.5 percent stake in M&T if merger talks between M&T and Spain's Banco Santander cannot be revived. A spokesman for Allied Irish declined to comment.

Santander has confirmed it has held talks on merging its U.S. operations with M&T and a separate media report last week said Santander was trying to revive those talks after initial discussions fell apart over the issue of control.

The Sunday Times, quoting unnamed sources, said Allied Irish was preparing a placing of its 22.5 percent stake in M&T at a 'single-digit' discount to the prevailing market price, with no single buyer allowed to take more than 2 percent of the shares on offer, should there be no deal with Santander.

'With shares in M&T closing last week at $88.37, a small discount to this price would come close to our base case of $85, raising 1.15 billion euros in capital,' Goodbody analyst Ken Darmody said in a note.

Allied Irish needs to raise 7.4 billion euros this year to meet new regulatory capital requirements and plug the hole after loan sales to Ireland's 'bad bank' scheme.

Besides the M&T stake, it wants to sell its majority holding in Polish Bank Zachodni WBK and its British businesses.

Non-binding bids for Zachodni were due by Monday, according to an industry source. Last week, Polish Treasury Minister Alexander Grad threw his weight behind PKO BP's likely bid for Allied Irish's 70 percent stake in Zachodni, which is worth about $3 billion.

PKO is expected to face off against several large European banks, including UniCredit, Santander, BNP Paribas and Russia's Sberbank.

The industry source had said binding offers would be required in September. Brokers in Dublin cited reports that a shortlist of bidders could be drawn up by mid-July, which was also supporting Allied Irish's shares.

(Reporting by Andras Gergely, editing by Will Waterman) Keywords: ALLIEDIRISHBANKS/ ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.