AIB flotation could net €3.4bn for State

The flotation of AIB has proved to be more lucrative for the Government than had been thought earlier in the week, with shares rising up to 7% as an almost 29% stake of the bank was floated at €4.40 per share.

Having said a minimum of 25% of its stake would be sold off, an additional 3.7% was sold, netting an extra €400m on top of the €3bn forecast in recent days. The bank is valued at €12bn. In February, the National Treasury Management Agency valued AIB at €11.3bn, although it had an estimated value of €12.2bn at the end of 2015.

At the beginning of last week, when the Government published its initial prospectus for the partial AIB float, its guided share price range, of €3.90 to €4.90 per share, estimated AIB’s market value at €10.6bn to €13.3bn, although the higher end of that range was viewed as being aspirational.

The pre-float share price range has been revised twice this week — first on Tuesday night to €4.20-€4.60 and 24 hours later to €4.30-€4.50.

The flotation starts the repayment process of the near €21bn the State invested in propping up a stricken AIB nearly seven years ago. Credit rating agency Fitch said the privatisation of AIB was able to get underway thanks to the bank’s improving credit fundamentals, helped by falling unemployment, rising property prices and strong economic growth.

“The sale indicates that the Government may ultimately recoup most of the €20.8bn it invested in AIB. It has already received €6.8bn from AIB in repaid capital, fees, dividends, coupon payments, and levies. The shift in ownership does not change AIB’s credit fundamentals or ratings, but the Government’s decision to start the sale process was due to the bank’s improving financial profile, which this year enabled it to pay its first dividend since 2008,” Fitch said.

The agency said AIB’s main weakness, its asset quality, was also improving with the bank managing down its stock of impaired loans, helped by property price growth, investor demand and a low inflow of new impaired loans.

Despite the upbeat mood among government figures, Fianna Fáil finance spokesperson Michael McGrath, whose party was in power when the economy collapsed and the banking crisis began, said it was not time to celebrate. “The ordinary shareholders who lost everything in the banking collapse of 2008 should be remembered. In addition, the enormous sacrifices imposed on the Irish people as a result of the banking collapse have to be recognised,” he said.

All of the proceeds will be used to pay off debt, contrary to calls from opposition figures to use some of the funds for capital investment. The sale is the biggest flotation in Europe this year. AIB’s shares will begin formal trading in Dublin and London early next week on an unconditional basis.

“This is a landmark day for the bank. The level of investor interest and support for AIB and Ireland is a great vote of confidence in the strength of the turnaround in the bank and the wider economy. It paves the way for the full recovery of the investment in AIB over time as we return to full private ownership,” said CEO of AIB, Bernard O’Byrne.


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