Government raises €515m from sale of further 5% stake in AIB

Minister for Finance Michael McGrath has raised almost €515 million from the sale of a further 5 per cent stake in AIB as the State continues to claw back the bank’s crisis-era bailout.

The shares were placed a price of €3.93 each, representing a 3.2 per cent discount to their closing price on Monday. However, it was 8 per cent ahead of the price at which the Government last sold a large block of shares in AIB in June. The deal reduces the State’s stake in the bank to 40.8 per cent.

The Minister has agreed as a result of the transaction not to carry out an additional AIB block share sale for at least 90 days or to resume regular drip-feeding of stock on to the market for at least 45 days.

The share sale will increase the amount that AIB has paid back of its €20.8 billion rescue to about €13.6 billion. The Government’s remaining stake currently has a market value of about €4.3 billion – meaning that taxpayers are currently sitting on a €2.9 billion cash shortfall on their investment in the bank.

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“Following the applicable lock-up period, we will again assess additional opportunities for share sales as they arise as it continues to be this Government’s belief that banking in the main is an activity that should be provided by the private sector,” said Mr McGrath.

The Government has been selling down its stake since early last year on three fronts: dribbling small amounts of shares into the market; placing larger 5 per cent blocks on occasion; and participating in stock buy-backs by the bank. The holding stood at 71 per cent in January 2022 before the sell-down programme began.

The cash recovery to date also includes proceeds from an initial public offering in 2017, redemption of bailout bonds, interest, guarantee fees and dividends.

AIB chief executive Colin Hunt welcomed the latest share placing: “It is another important development in the process of returning the State’s investment in the group and a normalisation of the share register. AIB owes the Irish taxpayer an immense debt of gratitude for its support during the financial crisis.”

Mr Hunt said last week, as AIB raised its full-year income forecasts for the third time in 2023, that the bank would outline how much surplus capital it plans to return to investors over the coming years. He told analysts that his preference would be to use surplus capital to grow the group’s dividend “sustainably” and also buy back more of the State’s shares in the company.

Davy analyst Diarmaid Sheridan estimates that AIB will pay out almost €4.3 billion to investors over the next three years – the equivalent of almost 40 per cent of its current market cap.

AIB said last week that it expects its net interest income (NII) to top €3.75 billion – €150 million higher than its previous guidance – as savers have been slower than expected to move from low-rate accounts into its more attractive products following a raft of official rate hikes by the European Central Bank.