The Government has reduced its stake in AIB below the 40 per cent mark in advance of the lender reporting annual results on Wednesday, where it is expected to show that net interest income soared by almost three quarters.
The holding now stands at 39.98 per cent as Minister for Finance Michael McGrath continued to drip feed stock into the market in recent months. The position had stood at 40.77 per cent as of last November.
AIB chief executive Colin Hunt is also expected by analysts to confirm with the results that the bank will use hundreds of millions of euro of excess capital to buy back more shares from the State – continuing a practice undertaken in each of the past two years.
All told, AIB is seen announcing a total of €1.4 billion of capital distributions this week, including regular dividends.
The latest bout of share selling will increase the amount that AIB has paid back of its €20.8 billion rescue to about €13.7 billion. The Government’s remaining stake currently has a market value of about €4.6 billion – meaning that taxpayers are currently sitting on a €2.5 billion paper shortfall on their investment in the bank.
Why did Bank of Ireland shares plummet despite record profits?
The Government has been selling down its stake since early 2022 on three fronts: dribbling small amounts of shares into the market; placing larger 5 per cent blocks on occasion; and participating in stock buy-backs by the bank. The holding stood at 71 per cent in January 2022 before the sell-down programme began.
[ AIB’s pay plea likely to fail as State still €3bn underwater on bailoutOpens in new window ]
The cash recovery to date also includes proceeds from an initial public offering in 2017, redemption of bailout bonds, interest, guarantee fees and dividends.
AIB has forecast that its net interest income for 2023 would amount to more than €3.75 billion, up 73 per cent on the previous year, driven mainly by income earned on about €30 billion of surplus deposits parked with the Central Bank of Ireland. These are currently earning an annual rate of 4 per cent, following a series of interest rate hikes by the European Central Bank in the 15 months to last September.
Irish banks have been slower than many European peers to pass on official rate hikes to both mortgage borrowers and savers.
- Sign up for Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Find The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly – Find the latest episode here
