Early election could delay sale of €3bn of AIB shares

An early sale of shares worth up to €3bn in Government-owned AIB could be delayed amid calls for Taoiseach Enda Kenny to step down.

Darren McKinley at Merrion Capital said that an early election could disrupt indicative plans for the Government to sell an initial 25% of AIB by May or June because the timing was no longer “ideal” as the political controversy of the past week has brought an election nearer.

There was an appetite for Irish stocks though the political uncertainty surrounding the outcome of elections on the continent also has in recent weeks led to some investor jitters.

“I would not be surprised to see it [the AIB sale] delayed,” the analyst said. Speaking in Brussels late last month, Finance Minister Michael Noonan said the initial public offering of shares in AIB was likely to be triggered in May or June.

More recently, Mr Noonan said the timing of any sale was contingent on the Government securing a good market price for its shares and that any transaction could take place later this year, or in 2018. It wants to get back the €21bn taxpayers injected into AIB to keep the lender from collapse during the crisis.

Any sale would nonetheless likely face scrutiny involving questions about if it was too early to sell a major chunk of AIB shares as the bank continues to be weighed down by a high level of non-performing loans.

However, a major report published yesterday by Investec Ireland said the sale of a stake worth €2.5bn€3bn by the start of the summer was still the most likely outcome despite the political turmoil.

Written by analyst Owen Callan, the report called AIB: Ready, Steady..., tells international clients that with Fianna Fáil “generally” backing the sale that it did not anticipate major opposition to the transaction emerging in the Dáil.

“We would note that recent political pressure on FG over their handling of garda whistleblowing revelations would be a risk-factor to the timing of the AIB sale, should fresh elections be called before the summer,” the report said.

“Though reasonably unlikely, in our view, it still presents a tail-risk on the indicated May/June timing for the AIB sale,” it said.

Philip O’Sullivan, chief economist at Investec, said that allowing for no major political shock from the looming elections in eurozone countries that the Government would likely stick to its schedule to start selling AIB shares by the summer.

The Investec analysis of the potential value in AIB focuses strongly on the strength of the recovery here, with AIB expected to restart paying a dividend based on its 2016 earnings.

“As to the valuation the Irish Government may seek in the sale of its stake in AIB, this will likely attract significant attention given the current scrutiny Nama is under as regards price levels that have applied to some of its completed disposals.

“Ultimately, we believe the Irish government will be pragmatic in its approach to valuation and no doubt recognises that the investment case will need to be attractive to international investors as well as representing fair value from the State’s perspective,” said Investec.

It said the payment of a dividend would help boost “public perception of the overall return the State is generating from AIB”.

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