NPRF hires Goodbody to investigate ‘inappropriate’ €66bn AIB value

The National Pension Reserve Fund hired Goodbody Stockbrokers to establish that investors are applying an “inappropriate” €66 billion value on state-owned Allied Irish Banks Plc.

The Dublin-based fund, which covered three-quarters of the state’s €20.7bn bailout of Allied Irish in the past three years, put a preliminary 1 euro-cent value on the stock at the end of December, said David Clerkin, an NPRF spokesman. The shares are currently trading at 12.9c, having soared 85% this year. Bank of Ireland Plc, the nation’s largest bank, rose 62% to 13.2c this year.

“AIB’s recent share price is comical as the moves closely reflect the recent strong performance by Bank of Ireland, despite the diverging fortunes of both banks,” said Stephen Lyons, an analyst with Dublin-based securities firm Davy. Bank of Ireland is 15.1% state-owned. “An implied €66bn market cap more than covers the recapitalisation cost of the entire Irish banking system.”

The trading anomaly first emerged in August, following the state’s most recent capital injection into Allied Irish at the end of July. At the time, the NPRF bought €5bn of new shares in the bank for 1c each, in an accord that valued group at about €5.1bn.

AIB is Europe’s fourth-largest bank by market value and it is “inappropriate” to rely on its quoted share price, as the amount of tradable stock is very small, Mr Clerkin said.

The NPRF has commissioned an independent fair market valuation review in respect of both its ordinary and preference share holding in AIB and will include this valuation in its annual report, Mr Clerkin disclosed.

The bank’s price “makes little sense and reflects a continuing ban on short-selling of its shares,” and the fact that it is thinly traded by retail investors, with no institutional stock changing hands, Davy’s Mr Lyons said.

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