AIB buy-back plan well on target

AIB’S 420 million share buy-back scheme, using half the $900m in cash it received from the fire-sale of Allfirst in the US, has already netted 30% of its target.

Yesterday morning, AIB announced that last Friday, it purchased ten million of its ordinary shares, at an average price of €12.85, to be held as treasury shares at a total cost of close to €128.5m. Yesterday, AIB shares closed at 13.05. The buy-back has a direct impact on EPS as no dividend will be paid on the treasury shares which may or may not be reissued by the bank.

AIB expected to buy the bulk of shares in its buy-back spree at close to €13. The buyback operation was triggered by the completion of the sale of troubled subsidiary Allfirst to M&T Bank.

The disposal of Allfirst followed the Rusnak rogue trader disaster.

Rusnak’s success in hiding trading losses of €691m over a five-year period hit confidence in AIB’s operations and its sale was expected sooner rather than later.

Buffalo-based M&T, which is 7.3%-owned by canny investor Warren Buffett’s Berkshire Hathaway Inc, paid $2.1 billion in shares and $900m in cash for Allfirst.

It is expected the rest of the shares will be bought over the summer until the 420m buy-back is completed.

In a note to clients, Merrion Stockbrokers said AIB had completed 30% of the buy-back in one day.

“If stock is readily available then the buy-back could be accelerated. This leaves us in a vacuum as to when the buy-back will actually be completed, but would suggest a shorter timeframe that we originally thought,” Merrion said.