AIB is in sufficiently good financial health for the Government to sell shares in the bank, an S&P Global Ratings analyst has said.
Sadat Preteni said the Government would decide on the best timing for any initial public offering, but that the balance sheet and the bank’s still-elevated level of non-performing loans should not stand in the way.
Even though Brexit could have a notable negative effect on Ireland’s economic and fiscal performance over the medium term, “there is fundamentally no financial reason to delay an IPO,” Mr Preteni told the Irish Examiner.
AIB has been helped by the economic recovery and an increase in house prices which has allowed it and other lenders to write back their high level of provisions.
He was reluctant to be drawn on the price the Government could expect if it were to sell a 25% stake in AIB this year. However, Mr Preteni said any sale of AIB shares was not coming at too early a stage as the bank had already made substantial progress in improving its financial health.
S&P last month lifted its rating on AIB back to investment grade for the first time in six years. “AIB has come a long way since the financial crisis,” he said, saying it had focused on reducing its level of non-performing loans.
He said he expected AIB’s non-performing loans levels to fall further but that the process would take time.
“From an AIB financial perspective, the bank has done as much as it can. It has also benefited from a rising economy in Ireland. There is not much more the bank can do right now. It has a strong momentum.
And there seems to be an interest in AIB based on the return to profitability and balance sheet strengthening by AIB,” he said.
“The most important aspect in terms of the valuation story is we have seen a rebound in bank valuations which has carried through to the first quarter of 2017. If you take that into consideration along with the interest that an AIB IPO will have for investors then it could be a good timing.”
On the prospects of new entrants, Ireland could become an attractive market “but at this point in time it is really not going to change much over the next two or three years”, he said.
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