Michael Noonan eyes autumn date to sell 25% of AIB shares

Finance Minister Michael Noonan has set a date for the sale of shares in AIB to stock markets.

He told reporters yesterday that if the Government were to get back into power after the election, it would almost immediately set in motion plans to sell a 25% stake in AIB to the markets.

The sale could take place at the earliest in May or June, but could more likely take place in the autumn, he said.

Mr Noonan said that AIB is currently considered a valuable asset on the State’s books, but he would not say what he believed to be the likely price that AIB would fetch in the looming IPO.

Asked why, given the strength of the economy, that the State is considering selling an initial stake in the bank so early in the economic cycle, Mr Noonan said that, “as a matter of principle”, economies work best when the banks are in private hands.

Without an IPO, it would be difficult to properly determine the value of AIB.

Nonetheless, he said, he could not envisage the whole of the State’s shareholding being sold within 10 years, even though it would be feasible to do so.

“The market is the test” for AIB’s value in future years after the initial 25% stake is sold, he said.

Mr Noonan said he was “absolutely confident” that every euro the State had pumped into AIB would in time go back to taxpayers.

Referring to the Swedish banking crisis more than 15 years ago, he said Sweden had held onto parts of its banks over a long period and had got back 2.5 times the nominal amount of its banking rescue costs.

He said that, after the IPO, any future sale of shares in AIB would be predicated on securing the best value for the Irish taxpayer.

“If you look at the bank’s balance sheet, it is growing from strength to strength,” he said.

There was a great potential for the banks to be very profitable and return the money the State had injected during the crisis.

Mr Noonan said that AIB’s IPO would be one of the largest on the London Stock Exchange — the principal market for AIB shares from now on.

AIB chief executive Bernard Byrne also told reporters that preparations for the IPO sale would show the “great” standing in which the bank and Ireland is held internationally.

In a separate development, Fitch Ratings yesterday in a report said that Irish banks were becoming more valuable, despite the high level of non-performing loans on their balance sheets.

Its views may have a bearing on the way international investors start to value AIB.

“The 2016 sector outlook for the Irish banking sector is positive, based on on-going improvements in the banks’ asset quality, business prospects, profitability and capitalisation,” said Fitch Ratings.

“This partly mitigates the high proportion of problem loans — including either non-performing or low-yielding loans as well as forborne, restructured, impaired or defaulted — still on these banks’ balance sheets.”

Fitch projected that gains in banks’ profitability in 2015 would “stabilise” in 2016.

AIB announced yesterday that it now has an extra €200m available to lend to businesses and farmers at an annual cost of 4.5%.

The funds were secured with the help of the Strategic Banking Corporation of Ireland (SBCI).

AIB said it had advanced €400m to more than 5,000 borrowers since the launch of the SBCI funding.