Government may sell AIB stake before next election

Noonan says selling the State’s holding in bailed-out lender would help set value for bank

Minister for Finance Michael Noonan speaks John Fraher, a managing editor at Bloomberg News, during a Bloomberg Television interview at the World Economic Forum (WEF) in Davos, Switzerland. Photographer: Simon Dawson/Bloomberg

Minister for Finance Michael Noonan speaks John Fraher, a managing editor at Bloomberg News, during a Bloomberg Television interview at the World Economic Forum (WEF) in Davos, Switzerland. Photographer: Simon Dawson/Bloomberg

Thu, Jan 23, 2014, 14:37

Minister for Finance Michael Noonan said the Government may seek to sell a stake in Allied Irish Banks before the general election in 2016.

The State owns 99.8 per cent of the lender after injecting €21 billion from 2009 to 2011 at the height of the financial crisis.

A sale of shares would help set a value for the bank, he said.

“There’s a political timetable as well,” Mr Noonan said in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland today.

“The Government will have an election at the latest at the end of March, early April 2016, so we might test the market sometime ahead of that.”

Irish banks would probably not have to raise more capital after European stress tests scheduled for later this year, Mr Noonan said.

While the bank rescue has pushed Ireland’s national debt to 120 per cent of gross domestic product, that will fall as the Government runs down its cash reserves and the value of its bank stakes rise, he said.

“Our debt-to-GDP ratio has peaked now,” Mr Noonan said. “The priority is to enhance value in the banks and even if we don’t sell we’ll be able to point to the market that we have collateral,” lowering debt levels in real terms.

“Certainly there won’t be a call on the state to provide capital” to the financial system, Mr Noonan said, adding he was hopeful of winning further ratings upgrades.

The Government has already more than recouped the €4.8 billion of the cost of rescuing Bank of Ireland, the largest lender, since 2009. The Government has collected €5.9 billion from the lender, while retaining an almost 14 per cent stake, valued at about €1.35 billion.

While Mr Noonan said he did not expect to fully privatise Allied Irish before the election, Bank of Ireland is different.

“It’s a question of what price we’d actually sell” the Bank of Ireland stake, he said. “But we’re under no pressure.”

“With the state having 99 per cent of the shares, we don’t really have an established market price on the shares,” he said. “But having done that, we’ll measure it but there’ll be no suggestion of a fire sale.”

Separately, Michael Hasenstab, a fund manager at Franklin Templeton Investments, which holds €10 billion worth of Irish Government debt, said the money manager took advantage of the panic that gripped investors in 2011 to become one of the biggest holders of Irish Government debt.

“When no one was buying, we stepped in. Now the world is interested in Ireland again, and to us, it proves having patience can be rewarded,” Mr Hasenstab said in a posting tweeted by the company.

“Hopefully, Ireland’s story will be repeated in many parts of the world that are struggling today. Even though the stories will be different, we plan to continue stepping in when other people are panicking.”

In terms of the wider euro-region, Mr Hasenstab said “we felt the European Central Bank would print a tremendous amount of money to prevent Armageddon.” “That still is our central scenario,” he said, adding that the euro probably will weaken against the US dollar and the opportunity in Europe is in countries like Hungary and Poland.

Bloomberg