Potential for AIB sale to raise more than €3bn

The prospects for the Government securing more than €3bn from its sale of AIB shares could brighten this weekend if French far-right candidate Marine Le Pen polls poorly in the first round of presidential elections, according to analysts.

The sale of a 25% stake in AIB by the Government has long been expected to raise between €2.75bn and €3bn for the State’s coffers.

The sale of shares in the bank, which was nationalised at the height of the financial crisis over six years ago, had been scheduled for a sale in late May, at the earliest, if market conditions allow.

The Irish Examiner reported over a month ago that the timing of the sale would pivot on the reaction of markets to the outcome of the French election, where National Front leader Ms Le Pen is a frontrunner and is bidding to win enough votes to get through to the runoff vote.

Turmoil on markets last year led to Finance Minister Michael Noonan postponing plans to start selling shares as bank valuations nosedived across Europe.

The slide in sterling against the euro following the unexpected vote by the UK to quit the EU last June had also posed risks to large swathes of the Irish economy and raised questions over the valuations of Irish banks.

The timing of a shares sale will effectively remain up in the air until the second round of the French presidential election is completed in over two weeks.

However, economists say that gains for banking and currency markets in recent times suggest the Government’s decision to sell AIB shares could pay off and for it to secure a better than expected price.

Alan McQuaid, chief economist at Merrion Capital, said the rally in sterling following the decision this week by UK prime minister Theresa May to call a snap election on June 8 was also “good for Ireland Inc” and by implication, the value the market places on AIB shares.

Speaking on the condition of anonymity, a second analyst said that markets were expecting that Le Pen would not have enough support to win the second round of voting on May 7.

And with sterling rising on a potential large victory for May in the UK, that the “stars could be aligned” for an AIB sale that raises more than €3bn, the analyst said.

Capital Economics in London said opinion polls suggest that Ms Le Pen will win enough votes to progress this weekend but that they also suggest she will get only secure about 40% of the vote in the second round, on May 7. The National Front’s influence in French politics could nonetheless be boosted, with implications for future elections, according to Capital Economics.

Though Ms Le Pen’s “more radical projects, such as ‘Frexit’ and drastic curbs on immigration stand no chance of being implemented” at this time.

Meanwhile, world stock markets eked out small gains in choppy trading as investors resisted risky bets ahead of the first round of the French presidential election over the weekend.

In general, markets cautiously stuck to well-worn trading ranges buffeted by concern over political risks and continued tensions over North Korea.

“Given the binary risk of the French presidential elections and geopolitical concerns over North Korea, investors are staying on the sidelines,” said Fan Cheuk Wan, head of investment strategy and advisory, Asia, at HSBC Private Banking.

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