Draghi and Trump unlikely allies for Noonan’s AIB IPO

As Minister for Finance Michael Noonan this week called on some of the world's largest investment banks to pitch for the job to run an initial public offering of AIB, an unlikely duo have got his back: Mario Draghi and Donald Trump.

European Central Bank president Mario Draghi came out this week to slam a Fianna Fail Bill that would give the Central Bank powers to force banks to cap interest rates, essentially saying it would be a retrograde step.

Imposing limits on rates would have the opposite to the desired effect, dampening competition as it puts off overseas lenders at even looking at the market, according to Draghi.

That’s to say nothing of what it would do to investor appetite when Noonan is planning to sell 25 per cent stake in AIB over the next year and a half.

As global markets weigh Trump’s election last week as the next US president, one sector that cheered the vote is banks. Expectations that Trump will push through a massive stimulus plan has lifted US inflation and rate-hike expectations, which bodes well for bank profitability.

Banking stocks in the euro zone have rallied by almost 34 per cent since the middle of the summer when bond rates hit all-time lows amid fears that unprecedented action by central banks globally was doing little to reignite inflation. The sector is now trading again at the value at which banking assets are valued on banks’ books - a crucial gauge of investor sentiment.

Shares in AIB's arch rival Bank of Ireland have soared by 37 per cent from their summer lows.

Earlier this week, the Dutch government managed to sell a €1.3 billion stake in ABN Amro, the remnant of a company that was taken over by RBS, Banco Santander and Fortis in 2007, only to require a €22 billion rescue from The Hague. The Netherlands has managed to offload a 30 per cent stake in the bank in the past year.

Few in the market believed a few months ago Noonan would get an IPO away next year. Some of the investment bankers passing through his office over the next few months may say otherwise.