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Deadline looms for Government on AIB flotation

Approval needed shortly but backdrop poor with bank stocks out of favour

AIB is due to hold its agm on May 24th and will publish its results for the first half of this year in July or early August. This trading update would be key to demonstrating the bank’s return to normalised lending. Photograph: Bryan O’Brien/The Irish Times

The new Government will need to press the button on a flotation for AIB this month if the bank is to execute a stock market flotation this year.

This timeframe would need to be met to allow the Government and bank to get through the planning stages, with mid-November the latest date for a listing this year, sources said. This all supposes that global market conditions begin to improve.

The backdrop is poor with bank stocks out of favour. Bank of Ireland has seen more than €3 billion wiped off its market capitalisation this year while Permanent TSB’s share price is down about 46 per cent.

Cabinet approval

A decision to proceed with an initial public offering (IPO) in Dublin and London would require Minister for Finance Michael Noonan to secure the approval of Cabinet. He would then move to appoint a syndicate of advisers to manage the process for the State. This could take a month to complete.

AIB is due to hold its annual general meeting on May 24th and will publish its results for the first half of this year in July or early August. This trading update would be key to demonstrating the bank’s return to normalised lending.

The book runners and co-lead managers on the IPO would also be expected to produce analyst research that could be used by potential investors. The bank’s executives would need to meet institutions in a series of roadshows in Europe and North America. It is understood the bank would seek to meet more than 400 potential investors and would have a number of teams operating in parallel during this time.

In the case of PTSB’s IPO a year ago, which involved the State selling a 25 per cent shareholding, bank executives met more than 100 potential investors over a number of weeks. This generated nearly 200 orders for stock.

In a statement to The Irish Times last Friday, AIB said the timing of any sale of shares was a matter for the Minister. “Our mandate is to be ready when that political signal comes. We are in a position now where we can respond readily to any decision of Government in this regard,” the bank said.

Last December Mr Noonan said he would seek Government approval to float 25 per cent of AIB this year, probably in the autumn. The delay in forming the new minority Government meant the decision had to be delayed.

Additional shareholding

The partnership programme agreed between Fine Gael and the Independents includes a commitment not to sell more than 25 per cent of any bank before the end of 2018, plus any small additional shareholding required by the underwriter to complete the sales process.

However, given the scale of the initial offering of AIB shares – at more than €3 billion it will be one of the biggest IPOs to date on the London market – selling a second tranche of shares before the end of 2018 was probably unlikely. The timing of an IPO will ultimately be determined by the Government desire to maximise its return from a sale of shares.

It is not clear if Fianna Fáil, which has agreed to support the minority Government, will seek to have its pre-election proposal to examine the feasibility of separating EBS from AIB to create a challenger mortgage bank followed through.

AIB received a €20 billion bailout, including for building society EBS. It has returned €1.6 billion to the State in payment for some of the preference shares held by the Government. It is also due to pay €1.7 billion next year when the contingent capital notes mature.