Minster for Finance Paschal Donohoe moved on Monday to sell taxpayers’ remaining stake of about 2 per cent in AIB as the Government seeks to draw a line under the biggest bailout of an Irish bank that managed to survive the financial crisis.
The sale, being carried out by way of a placing among institutional investors, known as an accelerated bookbuild (ABB), is expected to raise about €310 million. That takes into consideration an expectation that the shares will be sold at a slight discount to Monday’s closing price of €7.01 in Dublin.
“This is an important milestone in delivering on the Government’s policy of returning the banking sector to private ownership,” said Mr Donohoe.
The move takes advantage of how AIB’s shares have risen more than 31 per cent this year, as the bank has returned to growing its loan book in recent years, which should help offset the impact of declining global interest rates from their recent highs.
The European Central Bank has lowered its key deposit rate by half to 2 per cent over the past 12 months. However, it remains well above the rate, at minus 0.5 per cent, where it stood three years ago.
AIB’s shares have recovered from a sell-off across equities globally in April as investors fretted about US president Donald Trump’s tariff policies.
The State has so far recovered an estimated €19.4 billion of AIB’s €20.8 billion crisis-era bailout, including €1.2 billion spent by the bank on a targeted share buyback early last month.
It appears to be on track to recover about €19.9 billion in total – including money raised from the current share sale and about €250 million AIB is expected to spend buying back stock warrants the Government continues to hold in the bank.
The total recovery, which also includes proceeds from an initial public offering (IPO) of AIB shares in 2017, redemption of bailout bonds, interest, guarantee fees and dividends received from the bank, is likely to leave AIB about €900 million shy or repaying the State on a cash-in, cash-out basis.
[ State set to exit AIB within months as €1.2bn share buyback proceedsOpens in new window ]
The Government is also currently about €700 million under water on its €4 billion rescue of PTSB.
However, the shortfalls are more than offset by a €2 billion cash surplus paid by Bank of Ireland on its €4.8 billion rescue.
The Minister will turn his attention now to establishing a strategy to sell down the PTSB stake.
The removal of the State from the shareholder register will likely lead to a lifting of the €500,000 pay cap at AIB. Mr Donohoe will face pressure to make a similar move at PTSB to avoid it being alone among the three surviving rescued banks in having such a restriction. Bonuses of more than €20,000 remain banned across domestic Irish banks.
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The Government is not alone in seeking to wrap up under crisis-era bailouts. The past month have seen Keir Starmer’s administration in the UK sell its remaining shares in NatWest – a third of whose £45 billion (€52.8 billion) bailout was effectively pumped into its Ulster Bank unit – and the Dutch Government reduce its holding ABN Amro below 30 per cent.
Elsewhere, Greece concluded the reprivatisation of its lenders with the sale a stake in National Bank of Greece late last year.
