Donohoe warned huge tracker fine on AIB could hit plans to sell down shares in the bank

Fine for AIB over tracker mortgage scandal could represent a 'negative surprise' as the Government prepared to sell a significant stake in the bank, Finance Minister Paschal Donohoe was warned.

Finance Minister Paschal Donohoe was warned a hefty fine for AIB over its tracker mortgages could represent a “negative surprise” as the Government prepared to sell a significant stake in the bank.

Officials explained how two previous attempts to offload a large chunk of AIB had fallen at the final hurdle last November and again in March this year after the “war in Ukraine intervened”, according to Freedom of Information documents.  

The officials said June was the right time to sell down a major stake in the bank with “high-quality investors” ready to make sizeable trades for the AIB shares.

A submission for Mr Donohoe said there were already half a dozen institutions who had indicated a firm interest in buying the shares.

In a detailed submission, Mr Donohoe was told the Government should consider selling off around a €300m stake in the bank, which was about 5% of the lender. 

That amount could be increased up to €350m if “demand is strong”, officials said. The submission also warned that there may be “obstacles to navigate”. 

The officials also warned an impending fine on AIB by the Central Bank for its part in the tracker mortgage tracker scandal "could represent a negative surprise". AIB Group, which includes EBS, was fined a record €96.7m on June 23.          

The submission said there had been two aborted attempts to sell off a large stake in the bank, the first in November. 

“Just before launch, we learned that the likely discount [on the share price] was going to end up higher than we expected,” according to the submission.

It said the AIB share price had subsequently recovered due to the bank's strong trading statement, the plan to acquire Ulster Bank loans, its €91m shares-buyback programme, and confirmation of interest rate rises by the European Central Bank.

“All of these factors mean that investor appetite has increased materially in the stock, notwithstanding lingering concerns that there is a recession coming in Europe that will harm banks,” the submission said. 

Another submission — prepared after the sale had gone through — said the shares had been sold at a price of €2.28, a 6.5% discount on their closing price from June 27. 

It said the price in the transaction was above the AIB share price when Ireland announced its first case of Covid-19 in 2020.