AIB plans to speed up reduction of 71% taxpayer stake

State-controlled AIB is seeking shareholder approval at its upcoming annual general meeting (agm) to allow it to buy back up to an almost 5 per cent stake from taxpayers, as it seeks to accelerate its privatisation.

The lender, led by chief executive Colin Hunt, said in a notice posted on its website on Thursday afternoon that it is proposing a resolution at its agm in early May to enable it enter a so-called directed buyback contract to repurchase up to 4.99 percentage points of the State's 71 per cent bank stake.

Approval, which is assured given the State’s controlling stake, would last for 12 months.

“Authority to enter into the Directed Buyback Contract will give AIB the flexibility, if appropriate at the relevant time and with the agreement of the Minister for Finance, to help facilitate the return of AIB to full private ownership over time through the use of AIB’s excess capital,” said deputy chairman Brendan McDonagh.

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“The directors will only make off-market purchases with the Minister for Finance’s agreement and where, in light of market conditions prevailing generally at the time, they consider that such off-market purchases will be in the best interests of shareholders as a whole.”

The Government’s hope of following up a 29.8 per cent stock market share sale in AIB in 2017 with regular share placings, to claw back the bank’s €20.8 billion crisis-era bailout bill, has been thwarted in recent years by a subsequent slump in the company’s share price.

While AIB shares have rallied by more than a third over the course of the first three months of this year, they remain at almost half their €4.40 June 2017 IPO price. The bank is also trading at a similar discount to the estimated value of its assets.

Rescue bill

While a 5 per cent stake would cost AIB about €300 million today, it is likely that any buyback around these discounted levels would court political pushback. The bank has so far only repaid half of its rescue bill.

UK lender NatWest Group, previously known as Royal Bank of Scotland (RBS), has also used the directed share buyback route to lower its taxpayer holding.

Earlier this month, Boris Johnson’s government sold £1.1 billion of shares back to the company, reducing its stake to 59.8 per cent from 61.7 per cent.

A spokeswoman for AIB said that the company’s planned resolution “merely provides the bank with an additional option and flexibility as to how to use its capital in the future”.

Separately, AIB’s chief financial officer Donal Galvin said last month that with the bank set to return to profit this year, after Covid-19 resulted in a loss in 2020, it is likely to resume normal dividends in early 2021, after two years of no shareholder payments.

He also said that the bank would also look at standard share buybacks.