AIB to return €1.76bn of bailout funding to the State

AIB will pay the State €1.76 billion tomorrow to redeem loan notes issued to it in July 2011 as part of its bailout from taxpayers.

This payment will involve the bank paying €1.6 billion to redeem the contingent capital notes (CoCos) at face value along with accrued interest of €160 million.

The payment will coincide with the release of AIB’s financial results for the first six months of this year.

Éamonn Hughes, a banking analyst with Irish stockbroker Goodbody, has forecast AIB will announce a net profit of €623 million.

AIB is expected to reiterate previous guidance that the timing of a stock market flotation is a matter for the Government but that the bank is ready to move once a decision has been made.

Last year, the Government had signalled its intention to float 25 per cent of AIB’s shares on the stock markets in Dublin and London at some point this year.

Volatility

However, this plan was postponed due to the extreme market volatility in financial stocks this year.

The CoCos payment will represent the second repayment of capital by AIB of the €20.8 billion bailout from taxpayers following the banking and property crash in late 2008.

In a written answer on July 19th to a question posed by Fianna Fáil's finance spokesman Michael McGrath, Minister for Finance Michael Noonan said the redemption of the CoCos would remove the "final legacy capital instrument of the financial crisis from the balance sheet of AIB".

Redemption

It follows on from AIB’s capital reorganisation last year, which allowed for the part redemption of the State’s 2009 preference shares for €1.7 billion in cash.

AIB was valued at €12.2 billion by the National Treasury Management Agency at the end of last year but, in reply to another question from Mr McGrath last Thursday, Mr Noonan said this figure "does not include the impact of factors which, since the start of 2016, have significantly reduced the valuation of European-wide bank stocks".

Separately, Permanent TSB, which is 75 per cent owned by the State, is expected to announce it made a profit in the first half of this year, its first surplus since 2007.

Goodbody expects PTSB to announce a net profit of €41 million for the half-year, compared with a loss of €410 million for the same period of 2015.