The Coalition has issued a final annual report on the 2011 Programme for Government, which finds that a terrific job has been done.

No surprise there, but the document makes a rather interesting case about the valuation on the State’s stakes in the surviving banks and its return thus far from the bailouts.

First, consider the backdrop. Key here is the declaration by Minister for Finance Michael Noonan that the State will eventually recoup the entire €29.4 billion it ploughed into AIB (now combined with the Educational Building Society) as well as Bank of Ireland and Permanent TSB. That is a substantial sum, but even achieving the objective would not negate the loss of €34.2 billion which went to Anglo Irish Bank and Irish Nationwide Building Society.

The Government’s report goes some way to claiming the target has been realised already. Not in real terms, of course, but on paper. Here’s what it says: “The total proceeds received to date from disposals, fees, and income, together with the most recent valuation of the remaining investments, now covers the €29.4 billion originally invested in these three banks, and the State will ultimately recover all of its investment over time.”

That’s a rather clever construct, which draws on proceeds from Bank of Ireland and PTSB and their stock market valuations, but it is still a paper exercise.

Note that it draws on an €11.7 billion valuation on AIB in the December preference share conversion, which was approved by the pan-European bank regulation. The State realised €1.64 billion, bringing the total recouped from AIB to €4.6 billion when including €3 billion received from guarantee fees, transaction fees and interest income. A further €1.6 billion is to be received this year through the redemption of contingent capital notes.

That’s all very well. But it is only when – or if – the State proceeds with an initial public offering of AIB shares that the €11.7 billion valuation be tested by the market in real time. At the end of the day, that’s the one that counts.