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Irish Times
9 hours ago
- Business
- Irish Times
AIB falls €700m short on bailout repayment, as Ireland sells its last shares in the bank
AIB is set to fall about €700 million short of repaying its €20.8 billion taxpayer rescue bill, as the Government turns its attention to realising the value of stock warrants held in the lender after selling its remaining shares in the bank. Minister for Finance Paschal Donohoe confirmed on Tuesday he has sold the State's remaining 2.06 per cent stake in AIB for €305.3 million, bringing the total recovered to date from the bank to €19.8 billion. The Government also holds stock warrants in AIB which analysts estimate are currently worth about €300 million. Department of Finance officials are considering options for these, including AIB purchasing the warrants back from the State, the Minister added. 'This is an important milestone in delivering on the government's policy of returning the banking sector to private ownership,' Mr Donohoe said. READ MORE The Minister noted that in late 2021, when he went about selling down the State's then 71 per cent remaining stake in AIB, that he said banking should be provided by the private sector, as it involves taking credit risk. [ Department of Finance to wind down special bank shareholdings unit Opens in new window ] '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,' he said. The total AIB bailout recovery, which also includes proceeds from an initial public offering (IPO) of AIB shares in 2017, redemption of bailout bonds, interest, guarantee fees and dividends received from the bank, is on track to be about €700 million shy or repaying the State on a cash-in, cash-out basis. However, Mr Donohoe said that taxpayers are currently about €600 million above water on their €29.4 billion rescue of AIB, Bank of Ireland and PTSB. That's because it recovered €2 billion more from Bank of Ireland than the lender's €4.8 billion rescue bill as the other two are on track to come up short. The removal of the State from the shareholder register will likely lead to a lifting of the €500,000 pay cap at AIB. It will face pressure to make a similar move at PTSB to avoid it being alone among the three surviving rescued banks in having such a restriction. Bonuses of more than €20,000 remain banned across domestic Irish banks. 'AIB profoundly regrets that the institution had to be rescued by the State almost two decades ago and owes an immense debt of gratitude to Irish taxpayers for the support provided during that challenging time,' the bank's chief executive, Colin Hunt, said. 'Since then, our focus has been on rebuilding trust, repaying the State and continuing to support our customers, communities and the wider economy.' AIB's shares have soared 31.5 per cent so far this year to more than €7. Analysts expect loan book growth, which resumed in 2021 after 13 years of contraction, to partially offset the effect of falling interest rates on earnings this year. Net profit at AIB rose 14 per cent last year to a record €2.35 billion, even as official interest rates fell at pace between June and December. 'With our market-leading customer franchise, resilient revenues and a strong capital position, we remain confident in the strong fundamentals of our business and our ability to play a positive role in the Irish economy, helping to build a more sustainable future for our customers while delivering sustainable returns for our shareholders,' said Mr Hunt. The stock warrants the State holds in AIB, issued at the time of the bank's initial public offering (IPO) eight years ago this month, gave the Government the right to buy back up to a 9.99 per cent stake in the bank if it doubled in value in the space of a decade from its €4.40 IPO price. The warrants were designed to avoid the State being embarrassed in the event of a massive surge in AIB's share price. The strike price of the warrants have been adjusted since they were issued, the factor in the effect of share buybacks. AIB estimated in March that it may cost about €250 million to buy back the warrants, based off a pricing model known as Black Scholes. Analysts estimate it could now cost about €300 million, given AIB's share price's advance since then.
Irish Times
11 hours ago
- Business
- Irish Times
AIB set to fall about €700m shy on repaying fully he State's post-crash bailout
AIB is set to fall about €700 million short of repaying its €20.8 billion taxpayer rescue bill, as the Government turns its attention to realising the value of stock warrants held in the lender after selling its remaining shares in the bank. Minister for Finance Paschal Donohoe confirmed on Tuesday he has sold the State's remaining 2.06 per cent stake in AIB for €305.3 million, bringing the total recovered to date from the bank to €19.8 billion. The Government also holds stock warrants in AIB which analysts estimate are currently worth about €300 million. Department of Finance officials are considering options for these, including AIB purchasing the warrants back from the State, the Minister added. 'This is an important milestone in delivering on the government's policy of returning the banking sector to private ownership,' Mr Donohoe said. READ MORE The Minister noted that in late 2021, when he went about selling down the State's then 71 per cent remaining stake in AIB, that he said banking should be provided by the private sector, as it involves taking credit risk. [ Department of Finance to wind down special bank shareholdings unit Opens in new window ] '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,' he said. The total AIB bailout recovery, which also includes proceeds from an initial public offering (IPO) of AIB shares in 2017, redemption of bailout bonds, interest, guarantee fees and dividends received from the bank, is on track to be about €700 million shy or repaying the State on a cash-in, cash-out basis. However, Mr Donohoe said that taxpayers are currently about €600 million above water on their €29.4 billion rescue of AIB, Bank of Ireland and PTSB. That's because it recovered €2 billion more from Bank of Ireland than the lender's €4.8 billion rescue bill.
