The Government put itself on a track to exit its crisis-era investment in AIB by the middle of year as it launched another block sale of a 5 per cent stake in the lender on Monday evening.
Minister for Finance Paschal Donohoe hired firms including Goldman Sachs, BNP Paribas, Bank of America and AIB’s Goodbody Stockbrokers unit to manage the latest block sale as shares in AIB surged to their highest level since early 2018.
The last government decided to hold off on what had become a routine November stock placing two months ago as voters headed to the polls.
The sale is expected to raise about €650 million, assuming a small discount is applied to the share’s closing price on Monday, as taxpayers continue to recover the bank’s crisis-era bailout. It will reduce the State’s holding to 12.5 per cent.
Analysts estimate that the stake will fall to zero by the middle of this year as AIB is expected to use hundreds of millions of euro of surplus capital on its balance sheet to buy back more government shares after it publishes its 2024 results in early March – and the Government continues a programme of drip-feeding small amounts of stock into the market.
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“Following the conclusion of this transaction, the State’s remaining shareholding in AIB will be circa 12.5 per cent. We will continue to assess additional opportunities for share sales as they arise,” said Mr Donohoe, who returned to the finance role last week on the formation of the new Coalition.
The latest placing will bring the total recovered by taxpayers from AIB’s €20.8 billion bailout to about €17.8 billion. Their remaining interest will be worth about €1.7 billion, based off current trading levels. That leaves the State currently about €1.3 billion underwater on its investment.
The timing of the latest block sale of AIB shares follows a 44 per cent surge in AIB’s shares over the past 12 months to an all-time high of €5.785 on Monday.
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Banking stocks have jumped in value in recent years, as a spike in official interest rates drove profits higher. The remaining Irish banks have also benefited as they carved up most of the loan books of Ulster Bank and KBC Bank Ireland as they retreated from the market.
AIB is seen by analysts, however, as one of the most exposed large lenders across Europe to falling interest rates. However, this is expected to be partially offset as loan book growth is expected to continue in an expanding economy.
One of the first tasks Mr Donohoe faced when he was initially appointed as Minister for Finance in June 2017 was the sign-off on AIB’s initial public offering (IPO). He is seen as having missed a major opportunity to follow that up with more share sales as the stock continued to trade at high levels for the following 12 months, before slumping.
Mr Donohoe restarted the sell-down in January 2022, with his successors, Michael McGrath and Jack Chambers, continuing the plan during their times as ministers for finance.
The removal of the Government as a shareholder will most likely result in basic pay restrictions being lifted at AIB. Mr Donohoe decided in late 2022, when he was last minister for finance, to remove a pay cap at Bank of Ireland.
That came months after the State sold its remaining shares in Bank of Ireland, recovering €6.7 billion in total – some €2 billion more than that bank’s rescue cost. Bonuses across Irish banks that needed State aid remain capped at €20,000 as anything above that is subject to a prohibitive 89 per cent super tax.
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