Analysts: Politics won’t scupper AIB sale plan

There is a very low risk that political strains at home will scupper the launch of a sale of shares in AIB by early summer, analysts have said.

Fri, 03 Mar, 2017 - 00:00

Eamon Quinn

Owen Callan, analyst at Investec Ireland, said the bank’s decision to restart paying a dividend for the first time since the financial crisis had “smoothed” the path for the Government to confirm it will sell a 25% stake in AIB.

Potential investors will view the dividend payment as a signal the regulator is confident that AIB has a grip over its still elevated level of non-performing loans, the analyst said.

In its 2016 results, released yesterday, AIB said it had net interest income of over €2.01bn, up 4% from a year earlier. At €294m, it reported a much lower level of write back in loan provisions and posted a 12% drop in pre-tax profit to over €1.68bn.

Its net interest margin—a key measure of performance for banks—climbed to 2.25% from 1.97%.

Chief executive Bernard Byrne said the proposed payment of €250m in a dividend payment was evidence of the bank’s profit ability and marked progress in returning the bank to financial health.

The bank said it was ready for a shares sales whenever Finance Minister Michael Noonan decides that should be.

Mr Byrne told reporters the lender had made much progress in reducing the non-performing levels in recent years and had the “wherewithal” and “much more comfort” in ways of dealing with non-performing loans in the future.

Analysts said there was only a small risk signs of political tensions at home would deflect the Government from selling AIB shares in the early summer. Mr Callan said market concerns about continental European politics, including the Dutch and French elections, had eased.

Darren McKinley, analyst at Merrion Capital, said that the market was “ripe” for the sale of bank stocks. He predicted the Government could slot a sale of shares in late April at the earliest.

On the ongoing industry-wide investigation into tracker mortgages, AIB said it had compensated 2,600 customers so far.