Implied €50bn valuation of AIB ‘seems to be anomaly’

ALLIED Irish Banks, the country’s second-largest bank by assets, has a market value bigger than UBS and Barclays, even after its third bailout by the Government.

The taxpayer last week bought €5 billion of new shares in the bank for 1 euro cent each, giving it a 99.8% stake. That left investors with a stake valued at €100 million. Allied Irish has since traded at between 9 cents and 12 cents, for a market value of as much as €61.6 billion, three times the peak of February 2007.

“The implied valuation of Allied Irish at about €50bn makes little sense and seems to be an anomaly,” said Stephen Lyons, analyst with Dublin-based securities firm Davy. “The increase in the Government’s stake has not been fully digested.”

That anomaly makes the unprofitable lender Europe’s fifth-largest by market value, behind HSBC Holdings, Banco Santander, OAO Sberbank and BNP Paribas. The Government has injected €19.9bn into the lender over the past two-and-a-half years.

Irish banks are grappling with mounting bad loan losses, following the collapse of a domestic real-estate bubble in 2007.

Investors would find it easier to “correct the share price to a more reflective level” of its value, if a ban on short selling Irish banking stocks, introduced in 2008, wasn’t still in place, Lyons said.

“Share prices are determined at a level where there are willing buyers and willing sellers,” said Ailish Byrne, a spokeswoman for the Irish Stock Exchange.

Allied Irish spokesman Ronan Sheridan declined to comment, while Finance Ministry officials weren’t immediately available for comment.