Noonan triggers AIB share sale that could raise €3bn for State

Sale of 25% stake in Irish bank will be Europe’s biggest listing so far this year

AIB chief financial officer Mark Bourke and AIB chief executive Bernard Byrne on Tuesday: they will conduct an investor roadshow to generate interest in the stock.  Photograph:  Chris Bellew/Fennell Photography

AIB chief financial officer Mark Bourke and AIB chief executive Bernard Byrne on Tuesday: they will conduct an investor roadshow to generate interest in the stock. Photograph: Chris Bellew/Fennell Photography

 

Minister for Finance Michael Noonan has given the green light for the sale of a 25 per cent stake in AIB to stock market investors.

This begins a process that could take a decade to return the bank fully to private ownership.

The announcement on Tuesday evening marks the beginning of a four-week process before shares are expected to list on the main Dublin and London markets.

Analysts see the sale raising up to €3 billion, making it the biggest initial public offering (IPO) in Europe so far this year and one of the largest in the UK over the past two decades. However, it will be mid-June before the Government will publish a price range at which the shares are expected to be sold, after the British general election.

It will then take a further two weeks before the deal is fully priced. That’s after AIB’s top management, led by chief executive Bernard Byrne and chief financial officer Mark Bourke, conduct an investor roadshow to generate interest in the stock.

“The strong progress made by AIB and current market conditions mean that now is the right time to commence this process,” Mr Noonan said in a statement.

‘Drive the price up’

He subsequently told RTÉ in an interview that if British prime minister Theresa May’s Conservative Party secured a “strong majority” in next week’s election “it might drive the price up” for AIB shares.

The State took control of AIB two days before Christmas in 2010 to prevent it from collapse as its bad loans soared during the financial crisis. The bank required €20.8 billion from taxpayers between 2009 and 2011.

The Government has since recovered €3.3 billion of capital from AIB, plus a €280 million dividend paid this year, based on the bank’s 2016 results. When guarantee fees and interest payments are included, AIB has returned €6.6 billion to date.

The bank returned to profit in 2014 for the first time since 2008, as it began to free up money in a recovering economy that had previously been set aside to cover bad loans. At the height of the crisis, in 2013, over €29 billion of AIB loans, or a third of the group’s loan book, was classified as being in trouble. That figure fell to €9 billion at then end of 2016.

Small investors

The State plans to sell a portion of the shares on offer to small investors. However, these would have to have an account with a stockbroking firm and commit to investing a minimum €10,000 in the stock.

The IPO will mark the last major decision by Mr Noonan as finance minister, as he is due to step down in June. He took the role in March 2011, weeks before the State was forced by the terms of the nation’s international bailout to commit to pumping a final €14.8 billion into the bank.

Both Mr Noonan and Mr Byrne have previously said that it could take up to a decade before the State sells its final shares in AIB and fully recoups its bailout bill.