Recovering €29bn bailout from banks not 'over-riding' issue in AIB shares sale, McGrath told

Finance minister told 'political conversations' about another sale should take place but as long as these did not include a specific date they were not considered sharing 'inside information'

Michael McGrath was told it was key to keep reducing the State's exposure as an AIB shareholder.

Officials told the finance minister that recovery of the full €29bn the State used to bail out three surviving banks should not be the “over-riding consideration” as the Government looked to sell down more of its stake in AIB.

Ahead of the latest share sale of the bank earlier this month, a submission for Michael McGrath said the State had been a shareholder in AIB for 13 years and that it was key to keep reducing its exposure.

“Our advice for many years has been to gradually reduce our investment in the banks at sensible prices such that we can recover as much of the [circa] €29bn we put into AIB, BoI, and PTSB as possible," a pre-sale submission said.

Full recovery of the €29bn or what we put into AIB should not be the over-riding consideration that drives our decision-making. Bank shares are risky and volatile and the State has already been a shareholder in AIB since 2010.

Mr McGrath was told that “political conversations” about another sale should take place but that as long as these did not include a specific date, they were not considered sharing “inside information”. 

A post-sale submission on what was tagged Project Viking VI said the latest sale had yielded €515m and had reduced the State’s shareholding in the bank to 40.8%. 

The latest sale yielded €515m and reduced the State’s shareholding in AIB to 40.8%. Picture: Clodagh Kilcoyne/Reuters

The submission said another trade was now blocked until at least February, although this was seen as too close to the announcement of AIB’s full-year results to allow for another sale at that time.

“Therefore [if required] we recommend that you seek political clearance in the coming days, and ideally before AIB’s trading statement on November 1, giving you the ultimate decision and authority to execute a transaction based on our advice and market conditions,” said the document.

The submission said: “Department officials will continue to monitor market conditions and engage with [our financial advisers] Rothschild in relation to our next [move]. The AIB FY23 [full year 2023] results will be announced on 6 March 2024 so we cannot sell shares before then.” 

The document also explained how officials believed the €3.93 sale price from the early November sale was the highest they could push to “without losing significant orders from long-only investors”.

It said there had been strong demand for the shares and that AIB had continued to trade well in the aftermath of the bulk sale.

“The stock closed 4.8% higher than the placing price on the day following the transaction and remained close to this range for the rest of the week," the submission said.

“That is a good outcome from our perspective; investors need to see the stock trade higher immediately after the transaction,” it said.

Officials also told the finance minister that despite multiple large-scale sell-offs of the State’s AIB stake, the exchequer shareholding was still more valuable than it had been at the beginning of 2022.