Billions to be shaved off AIB’s value

The Government is likely to slash its €12.2bn valuation of AIB on the State’s books by billions to reflect the torrid times facing European bank shares this year, according to analysts.

The much-reduced valuation could delay any sale by the Government of an initial stake in AIB to 2018.

The Government, through the Ireland Strategic Investment Fund, last revalued AIB at the end of June, when it sharply cut its near 14% stake in Bank of Ireland.

It left unchanged the valuation of €12.2bn in AIB, which the Government all but owns outright, based on an independent valuation conducted at the end of 2015.

But analysts say AIB’s value will likely be cut to reflect the huge difficulties faced by European banks.

Irish banks have also been hit by investor concerns over Brexit and by the findings of EU-wide stress tests by the European Banking Authority.

Ryan McGrath, a senior analyst at Cantor Fitzgerald Ireland, said the drop in BoI shares implies the Government will likely cut its valuation of AIB by billions.

He said there was a risk that Cantor’s own estimate that an initial 25% of AIB would be sold in the second half of 2017 would now be “pushed out even further”.

Philip O’Sullivan, chief economist at Investec Ireland, said it had been a tough year for bank shares across the eurozone.

Brexit has been unhelpful and other specific issues “feed into the valuation of the taxpayers’ stakes in the banks”, he said. “Most issues this year have been unhelpful for Irish banks.”

Alan McQuaid, chief economist at Merrion Capital, said “sentiment in the sector is going to remain strained”.

“You have got the Brexit issues. You have the elections next year in Europe and I think the message is that you bide your time.

“There may be better times to offload it [the AIB stake],” he said.