In Focus: Allied Irish Banks

Finance Minister Michael Noonan and the Government’s banking market advisers will have to show their hand very soon, if they are to sell up to €3bn of shares in AIB in May or June.

The timing of any IPO and the price that investors will be prepared to pay for a 25% stake in the bank loom large as AIB releases its full-year earnings this week.

Minister Noonan in late January surprised many watchers when he said that if market conditions allow that early summer was the first window of opportunity for the return of a chunk of AIB to private hands.

The Government has long eyed a sale.

As the economic recovery took hold, the aim was to test the market as a way of securing as much as possible of the billions taxpayers injected into the banks during the crisis.

The surprise Brexit vote last summer added a layer of complexity and the near meltdown in European banking markets scuppered any plans for an early sale.

Now somewhat ironically, the election of president Donald Trump, who has pledged to reflate the US economy, has since boosted bank valuations in the US and Europe.

Government advisers will have to assess whether they will get close to a valuation of between €2.5bn and €3bn in a sale for a quarter of the bank.

Much less attention has been paid to the state of the loan books — which one way or another decides the valuations of all banks.

Almost 10 years from the onset of the crisis, the Irish lenders carry some of the highest levels non-performing loans in Europe.

Critics point out that reducing bad loans is the only way that banks can open credit to help firms and households.

No coincidence, the critics say, that Irish SMEs and home borrowers pay the highest costs for their loans.

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