The Government has sold its remaining stake in AIB, marking the end of a long, unloved chapter in banking history.
The Department of Finance says the State has made a surplus of €600 million on its €29.4 billion bailout of AIB, Bank of Ireland and PTSB. Some media reports refer to the State basically breaking even, but such phrasing conceals more than it reveals.
Firstly, the headline figure is in nominal terms. Adjusted for inflation, the real value of that €29.4 billion – doled out between 2009 and 2011 – is far higher. A euro in January 2011 is worth €1.29 today, which puts the cost of the bailout at roughly €38 billion in today’s money.
Then there’s interest. The State borrowed to fund the bailout. For AIB alone, the Comptroller & Auditor General put debt servicing costs at €7.1 billion by the end of 2021.
That’s before you factor in opportunity cost: what else that money could have done, were it deployed differently.
An investor who bought a dud stock in 2009 and finally got out at break-even might feel relief. However, a $1,000 investment in the S&P 500 in 2009 would be worth over $9,000 by 2025. Time has a cost; so does tying up capital in low-return assets.
Inflation, interest costs, opportunity costs – the framing around the break-even point is problematic. It is more of a psychological concept than a financial one.
To be fair, the objective was never to turn a profit. The bailout was about stabilising the banking system and preventing economic collapse, but that makes the implicit “we made money” narrative all the more grating. It reframes an emergency rescue as a shrewd investment, which it wasn’t.
Breaking even offers closure, but it’s no triumph.
