AIB chief says lender faces very valuable IPO

Bernard Byrne, the new chief executive at Allied Irish Banks, confirmed a so-called capital restructure is at an advanced stage, saying that the lender — bailed out at huge cost by Irish taxpayers — will be highly attractive when it returns to the market.

AIB’s Government owner has repeatedly said that a stake of 25% will be sold next year — after the election, but that restructuring the bank’s €3.5bn of preference shares — part of the €20.6bn taxpayers injected into the bank during the crisis — will be needed for the State to start getting back its cash.

Talking to reporters on the sidelines of a banking conference yesterday, Mr Byrne, who took up the top job at the bank in May, said plans to give back “a meaningful amount” of the bailout cash to the State by way of the preference shares will be completed by the end of the year. He denied that the looming election was driving any timetable by the bank and its Government owner to return some cash to the State by an early date.

Those plans — which aim to return all or most of the €3.5bn in preference shares — one of the instruments the State used to prop up AIB during the crisis, will effectively be completed in the next few weeks subject to agreement by the eurozone’s bank regulator — the Single Supervisory Mechanism (SSM).

Mr Byrne characterised the repayment of some or all of the preference shares as a necessary step towards simplifying the bank’s capital structure and therefore making the bank ready for an Initial Public Offering (IPO) of shares — whenever that comes.

He would not be drawn on how much of the €3.5bn the bank and its Government owner plan to redeem or convert, but he said that the State as effectively the 100% owner of all the financial instruments in the bank would not lose out even if all the preference shares were not paid back at this stage.

Investors want certainty about the bank’s capital structure and refinancing the preference shares would be a signal to the market that it had taken “a necessary step in terms of getting to the point where you can have an IPO” without the Government losing any value.

“It is obviously subject to an agreement with the SSM, people are talking in a range that seems sensible but I’m not going to comment on an actual number at this stage,” Mr Byrne said when asked about a Bloomberg report the bank could redeem €1.5bn to €2bn of preference shares.

There was no political timetable driving the redemption, Mr Byrne said. AIB has been striving toward a “consistent timeline” to return the bank to profitability and to make the lender “investable” again and there was no reason to delay. The bank, he said, had also done all it could to warn shareholders about a necessary share consolidation.

The way the State had injected cash into the bank meant AIB’s shares ballooned from a few billion shares to the current position where there are 523.4bn in issue. The anomaly has created a bizarre situation that AIB is theoretically worth €38.73bn. In his conference speech to the Banking and Payment Federation, Mr Byrne said the bank had “ample liquidity” to lend to viable businesses.

He said that the Government providing allowances for corporate equity held by firms was one possible way of plugging the problem of the “capital gap” businesses faced.