Government sale of final AIB stake crystallises €2bn loss on crash-era bailout

Irish Independent

5 hours ago

The exit from AIB is the second from bailout bank, In 2022 the state sold the last of its smaller stake in Bank of Ireland, locking in a profit on that rescue, The stake put €4.7bn into Bank of Ireland and recouped almost €6.7m.
The Department of Finance said on Tuesday that the final holding was 2.06pc in AIB sold at a price of €6.94 a share, The stake had been reduced to just over 3pc in May, when AIB itself bought back €1.2bn of shares from the government and had been whittled down further in the meantime.
The bailout of AIB, along with five other banks started with the bank guarantee in September 2008, when the then government committed to covering all debts of Irish banks for a period of two years and was then followed by a series of cash rescues at lenders, which in the case of AIB eventually added up to a €22.2bn rescue and effective nationalisation, according to calculations by the Comptroller and Auditor General, the State's key accounting watchdog. That figure is higher than the €20.8bn rescue cost usually quoted by both the bank and the Department of Finance.
The total upfront cost of the bank bailouts was €64bn. The Department of Finance said on Tuesday that taxpayers, an overall basis, based off current market prices, are c. €0.6bn above break-even on its €29.4bn investment in AIB, Bank of Ireland and PTSB. That figures ignores the cost of the failed rescues of Anglo Irish Bank and Irish Nationwide.
The State retains majority ownership in PTSB, the third bailed-out lender to survive the crash. Anglo Irish Bank and Irish Nationwide Building Society, which were also initially rescued, were eventually rolled into IBRC and liquidated.
The final sale of AIB shares was done through a so-called accelerated bookbuild transaction. This means the shares were placed with institutional investors over a very short time frame, likely as soon as tomorrow.
The finals sale was below Monday's closing share price of €7.01, which was close to the highest levels it has reached since about 2017.
Marking the disposal, Finance Minister Paschal Donohoe said it was an important milestone in delivering on the Government's policy of returning the banking sector to private ownership.
'When I announced the launch of the share trading plan in December 2021, I commented that banking is an activity that involves taking credit risk and therefore should be provided by the private sector. It follows that taxpayer funds which were used to rescue the Irish banks should be recovered and used for more productive purposes. The gradual disposal of the State's investment in AIB into a rising market has been successful in delivering on this objective for our citizens.'
The previous most recent tranche of shares had been sold in mid-May, when AIB did a deal to buy back €1.2bn worth. The transaction was flagged at the end of March but had hung in the balance after AIB's shares fell well below the minimum price of €6.2607 per share agreed with the Government until the days before a deadline to complete the deal or walk away.
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AIB's share price closed just 6c below the €6.26 'magic number' in the second week of May, paving the way for directors to give the buyback their blessing.
At the bank's AGM on May 1, shareholders had approved the directed buyback, with a 97.2pc vote in favour. As a connected shareholder, the Government did not get to vote on the offer.
The funds from such share deals generally go initially to the National Treasury Management Agency (NTMA) and are then made available for use by the finance minister.
The State's exit from AIB will raise questions about the future of the €500,000 limit on executive pay at the bank. Over the last 18 months, the bank has formally lobbied the Government five times on the issue, saying the board and investors had significant concerns about the ceiling.
The cap was introduced in 2009, after AIB was bailed out by taxpayers. Three years ago Mr Donohoe said it would be lifted once the State's shareholding fell below an 'appropriate level'.
Asked earlier this month, when the shareholding had been reduced to 3pc if that level had now been reached, the Department of Finance said: 'The Government remains committed to normalising the domestic banking system to best serve the interests of the economy. No further decisions have yet been made on this objective at this time.'
Attention will now turn to the PTSB, where the State retains majority control, owning 57pc of the stock.