State’s bank holdings lose €1.3bn in one year
A torrid year for European bank stocks wiped €1.3 billion off the value of the state’s shareholdings in AIB and Bank of Ireland during 2016.
The state’s stake in AIB is worth €11.3 billion, down from €12.2 billion in 2015, while its investment in Bank of Ireland fell by €400 million to €1.1 billion.
The figures provided by the Ireland Strategic Investment Fund (Isif), the statutory body with responsibility for managing the state’s bank shareholdings, come as AIB gears up for its long-awaited stock market flotation.
Michael Noonan, the finance minister, has indicated his preference to return a 25 per cent stake in the bank to private ownership as early as May, subject to market conditions.
A 25 per cent stake in the bank would be worth €2.83 billion based on the Isif valuation.
In December, Mr Noonan took his first step towards a potential initial public offering (IPO) by appointing three advisory firms to assist with the sales process.
Bank of America Merrill Lynch, the US banking giant; Davy, Ireland’s largest stockbroker; and Deutsche Bank, the German-headquartered bank, were appointed as global coordinators for the floatation.
The state holds a 99.9 per cent stake in AIB and a 13.9 per cent stake in Bank of Ireland.
Investec Ireland, a leading financial services company, last week issued a note to prospective investors highlighting the attractiveness of AIB.
Owen Callan, a financial analyst at Investec, said that the bank had undergone a significant transformation in recent years and should continue to benefit from growth in the Irish economy.
He added that AIB was highly profitable, well capitalised and held a leading market share across a range of business segments.
Analysts at Investec forecast that AIB would announce a full-year profit of €1.29 billion for 2016 when it releases its results at the beginning of next month.
Separately, AIB staff yesterday voted in favour of a new pay deal recommended by the Workplace Relations Commission and negotiated by the Financial Services Union (FSU).
The FSU recommended that its members at AIB accept a new two-year pay deal that will result in an average 2.75 per cent pay increase for staff this year and next.
The union has also extended current job security commitments until 2019, which means there will be no compulsory redundancies during that period.
Since 2009, Isif has invested €16 billion and €4.7 billion in preference shares and ordinary shares in AIB and Bank of Ireland, respectively.
The fund has received €6.4 billion in cash from the two lenders through preference share dividends, the redemption of preference shares, and the sale of ordinary shares to private investors.
Eamonn Hughes, an analyst at Goodbody Stockbrokers, said yesterday that Bank of Ireland was likely to announce the resumption of dividend payments in its interim results later this year rather than on Friday when it publishes its full-year 2016 accounts.
Should the bank not announce a dividend later this week, investors’ focus will shift to the cost of the bank’s IT overhaul which had been slated to cost €400 million but which Mr Hughes forecast could reach €500 million.
Meanwhile, the Competition and Consumer Protection Commission (CCPC) has published a public consultation on the Irish mortgage market, as set out in the programme for government agreed between Fine Gael and the Independent Alliance.
As part of the consultation, the CCPC is seeking the views of various stakeholders on issues such as competition, mortgage switching and the role of credit unions in the mortgage market.