AIB SHAREHOLDERS MEETING:SHAREHOLDERS IN Allied Irish Banks (AIB) overwhelmingly voted to accept the Government's €3.5 billion recapitalisation of the bank after a heated three-hour extraordinary general meeting in the bank's headquarters in Dublin.

Dermot Gleeson, who is retiring as chairman in July over AIB’s poor lending decisions and rising losses on property loans, opened the meeting shortly after 10am.

At the outset, he acknowledged the “anger and disappointment” among shareholders and of the “individual hardships” brought about by the fall in the share price and cancellation of AIB’s dividend.

Shareholders have seen 93 per cent of the value of their investments wiped out as AIB has lost €20 billion in value since the shares peaked at €23.95 a share in 2007. The share price closed down 14.4 per cent at €0.87 yesterday.

Mr Gleeson said AIB had thought that the economy would “slow gently rather than abruptly” but that “regrettably we were wrong”.

“With hindsight I regret some of the lending decisions that were made, particular in relation to property development here in Ireland and more particularly in relation to residential property development,” said the AIB chairman.

AIB has raised its bad debt forecast to €4.3 billion for this year from €1.8 billion last year due primarily to losses on loans to Irish residential property developers.

Mr Gleeson said his decision to retire was “the correct thing to do”; shareholders were “entitled to a clear signal of accountability”.

Chief executive Eugene Sheehy told shareholders later: “The real mistake, for which I take responsibility, is that we lent too much for development land in Ireland. It was our home market and we were competing fiercely in the market and that is the risk we took.”

AIB has €22 billion in development loans, but €10 billion of this – 8 per cent of the bank’s €129 billion loans – were loans to Irish residential developers. Mr Sheehy said that this was “too much, at the wrong time, in a shock that was more severe than a one-in-25-years or one-in-50-years shock . . . It is the single point of failure in terms of what has led to the erosion of shareholder value. There are macro issues all over the world – as CEO, when I reflect on that, I feel that I have to take accountability for it and that is why I have decided to retire,” said Mr Sheehy.

Shortly after opening questions to shareholders, Mr Gleeson was hit by two eggs thrown by Gary Keogh, a 66-year-old retiree from Blackrock, Co Dublin, who lost his pension income in AIB shares.

Mr Keogh was escorted from the meeting by AIB security staff.

Later, in response to a shareholder’s criticism of bank regulation, Mr Gleeson said there was a “tabloid search for a bad guy and to, well, throw eggs at him” but that this was a little simplistic when it came to assigning blame for the global banking crisis.

Shareholders repeatedly questioned Mr Gleeson about AIB’s decision to lend heavily to development and construction, and why the full board was not facing them.

Only Mr Gleeson and the two AIB executives, Mr Sheehy and finance director John O’Donnell, who is also retiring in the coming months, addressed shareholders.

Susan Kelly, an investor who with her husband had lost most of their investment in AIB, said that shareholders had been “robbed”.

She asked whether AIB’s board could comprehend the pain shareholders were feeling, saying that it was “real”, and “unbelievably breathtaking and life-taking in some circumstances,” she said.

“People have for generations invested their valued savings supporting this bank and in a few short years you have obliterated and squandered it through your actions, greed, dereliction of duty, mismanagement and incompetence,” she said. “You were the financial foundation of the State and you have pauperised a generation.”

Another shareholder, Denis Aylmer, questioned the bank’s plans to sell its most profitable parts to raise the additional €1.5 billion in capital required by AIB.

Mr Gleeson said that the bank had “a variety of possibilities”, including the sale of assets and buying back debt, but that he wanted to retain flexibility on this.

Several shareholders asked when AIB would resume paying a dividend and stated that many pensioners depended on dividends to pay for their nursing home fees.

Mr Gleeson said he could not say when dividends would resume but AIB hoped to reward shareholders again “on the far side of this cycle”.

Explaining why AIB lent aggressively to developers, Mr Gleeson said the bank was “too optimistic”. “We drank too deeply from the national cup of, I suppose, confidence . . . The national mood of self-confidence brewed itself up into overdrive.”

Mr Gleeson resisted calls for the board to resign saying that there needed to be “a sensible balance” struck between “the need for change on one hand, and continuity and stability on the other”.

He said five directors, a third of the board, were resigning immediately or over the coming months.

Independent Senator Shane Ross later responded: “The last thing we want here is continuity – what we want above all is change.”

He called unsuccessfully for all directors seeking re-election to make presentations at the meeting and said AIB should appoint an outsider to replace Mr Sheehy.

Mr Gleeson said that risks were attached to appointing insiders and outsiders, and that a balance had to be be struck.

Asked why AIB did not heed warnings from analysts about the risks facing the lender as far back as late 2006, Mr Gleeson said: “If you look at the tipsters for yesterday’s racing, one in 10 of the tipsters is right and nine are wrong.”

Mr Sheehy said AIB, which had 40 per cent of the country’s business customers, had increased loans to four industries by up to 13 per cent and was selling mortgages at double its traditional rate.

Mr Gleeson said nationalisation would be “a bad thing for shareholders and for Ireland” and the bank would avoid it “at all costs”.

He said that if the design of Nama was “sane, sensible, reasonable and fair”, it would “work for the benefit of all”.

He said that talks about Nama were “complex and ongoing”.

Shareholders voted in favour of the recapitalisation by 99 per cent.