UK political uncertainty could delay AIB flotation pricing

Bank’s share sale expected to proceed this month despite post-election uncertainty

Pricing the AIB IPO is likely to be one of the first major decisions to be made by the new minister for finance.

Pricing the AIB IPO is likely to be one of the first major decisions to be made by the new minister for finance.

 

The Government could delay the pricing of the AIB share sale by a couple of days to assess the impact of the UK general election result on investor appetite for what would be the biggest initial public offering (IPO) in Europe this year.

The Department of Finance had been expected to issue the prospectus and price range for AIB’s IPO early next week but sources indicated that this could be pushed back by a couple of days or could even fall into the following week.

The State’s UK-based IPO advisers were in Dublin yesterday to update officials from the department on the AIB flotation process.

There was no sense that the Government was considering postponing the IPO in the wake of the UK vote, which has resulted in a hung parliament and created huge uncertainty around its Brexit negotiations with the European Union.

It is understood that investor appetite for AIB’s flotation has been positive and the department is thought to be happy with the level of engagement to date.

In a statement, a spokesman for the department said: “The transaction timetable was designed to cater for the UK election. We remain on track to issue a price range prospectus over the next week or so.”

Market performance

The performance of markets over the next couple of days, and banking stocks in particular, will be crucial to any decision on whether to press ahead or not.

Bank of Ireland closed up 1.3 per cent on Friday, while Permanent TSB was unchanged at €2.88. AIB’s shares were down 3.8 per cent but this is a meaningless indicator as the State owns 99.9 per cent of the company and the stock trades only on the secondary ESM index here.

The State is planning to sell up to 25 per cent of AIB on the main stock markets in Dublin and London. It was estimated that this could net the Government about €3 billion.

Pricing the IPO of AIB is likely to be one of the first major decisions to be made by the new minister for finance. Fine Gael’s new leader, Leo Varadkar, is expected to be elected as taoiseach on June 14th, with a new minister for finance to be appointed following Michael Noonan’s decision to step aside.

Commenting on what the Government should do with the proceeds of the AIB sale, Irish MEP Brian Hayes said: “We should part save it especially for future pension liability, and part write down the national debt.

“The markets are watching and will interpret the use of AIB proceeds for expenditure purposes as a warning sign from Ireland. That in itself could increase the cost of Irish debt – negating any advantage of selling AIB.”