Government to launch €3bn AIB shares sale

The Government is on course to launch a €3bn sale of shares in AIB, marking the start of a reprivatisation process that will still likely take years before taxpayers recover all of the €21bn they injected into the bank during the financial crisis.

The starting pistol for the sale of up to 25% of the bank, which may take place in May or June, could likely be sounded as early as today when AIB releases its earnings for 2016.

AIB is also tipped to announce plans to resume paying dividends to shareholders. Such news would likely encourage investors to buy shares in the bank.

Along with Bank of Ireland, AIB hasn’t paid a dividend since the onset of the financial crisis, as lenders struggled with huge levels of non-performing mortgage and commercial loans.

The Government was last year forced to scrap early plans to launch an initial public offering in AIB shares after banking markets across Europe went into meltdown amid fears over German and Italian banks. Brexit also sowed deep confusion for investors.

The Government’s confidence of a renewed appetite in Irish banking shares has been bolstered by the rebound in bank valuations. Pledges by Donald Trump to rebuild the US infrastructure continued to boost bank stocks and valuations for banks around the world.

In late January, Finance Minister Michael Noonan said the first opportunity to sell shares in AIB could arise as early as May or June. The Government since indicated that other dates, including in the autumn, remained in contention.

It subsequently revealed it valued its 99.9% ownership of AIB on the State’s books at €11.3bn at the end of last year, down from €12.2bn a year earlier. Analysts said at the time that the valuation nonetheless marked another step that brought the sale of AIB shares closer.

AIB has long pledged that taxpayers would get back all of the €21bn injected to keep the lender from collapse.

The Government will likely argue that through a number of financial instruments, such as the redemption of preference shares, that taxpayers had already started to receive repayments from AIB. It will also argue that the sale of up to 25% will only be a start and, as the economy improves, future sales of shares could fetch higher prices.

Weighing on the valuation of AIB is that it continues to carry an elevated level of non-performing loans.

Analysts say it will take many more years for the Government to complete the full privatisation of AIB.

An analyst at S&P Global Ratings told the Irish Examiner last month that AIB was in sufficiently good financial health and there was no financial reason blocking the Government from selling shares in the bank.