AIB may exit majority State control by end of the decade

AIB, which was seized by the State in late 2010 to prevent its collapse, may be out of majority Government control by the end of the decade.

Speaking in an interview with The Irish Times after the Minister for Finance, Michael Noonan, sanctioned the sale of an initial 25 per cent stake in AIB, chief executive Bernard Byrne said that it was "conceivable" from a markets perspective that the majority of the bank's shares could be in private investors' hands within "three to five years".

“Ultimately that’s a decision for the minister of the day,” said Mr Byrne. “The first piece is getting the 25 per cent away. Everything becomes significantly easier after that.”

Mr Noonan announced on Tuesday his intention to sell the initial quarter stake in AIB to stock market investors by way of an initial public offering (IPO), which may raise as much as €3 billion.

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The bank received a €20.8 billion bailout during the financial crisis and has since returned €6.8 billion to the state, including capital repayments, dividends, bank guarantee fees and interest payments.

The Minister and Mr Byrne have previously said that it may take up to a decade before the State recovers the entire amount committed to AIB to prevent the bank collapsing as loan losses soared.

Drip-feed

It is most likely that the State will drip-feed AIB shares onto the market in the coming years after the IPO. The UK government has used a similar strategy in recent years to sell its 43 per cent stake in Lloyds Banking Group, acquired in 2008 in return for a £20.3 billion (€23.4 billion) rescue investment in the London-based bank. The final shares were sold last month.

AIB's level of bad loans peaked at €29 billion in 2013, but this has subsequently declined to €8.6 billion as the economy has rebounded and it restructures unsustainable debt. Chief financial officer Mark Bourke said this week that AIB aims to largely resolve the non-performing loans problem within the next two to three years.

AIB paid a €250 million dividend to the State earlier this year, its first shareholder payout since 2008.

The bank is "working towards an annual payout in line with normalised European banks, with capacity for excess capital to be returned to shareholders through special dividends and/or buybacks, all subject to regulatory and board approval," the Department of Finance said in the official document published this week announcing its intention to float AIB.