Donohoe announces plan to reduce stake in AIB
Finance Minister Paschal Donohoe said he intends to sell part of the State’s 71.12% directed shareholding in AIB Group over the next six months.
The shares will be sold through a pre-arranged trading plan that will be managed by Merrill Lynch International (“BofA Securities”).
BofA Securities was appointed to the role from the Department of Finance’s Panel of Financial Advisors following a mini-tender competition.
The Minister did not say how much of the AIB holding he plans to sell, but said that under the trading plan BofA Securities has been mandated to effect a “measured and orderly sell down” of shares in the bank on his behalf.
The number of shares to be sold will depend on market conditions, amongst other factors.
In order to ensure that the taxpayers’ interest is protected, shares will not be sold below a certain price per share, which the Department of Finance will keep under review.
The trading plan will become operational in the middle of January and will end no later than six months afterwards.
But it can be renewed at the Minister’s discretion, the Department of Finance said in a statement.
Today’s move comes as the Government has reduced its stake in Bank of Ireland from 13.9% to 9.3% over several months this year.
Colin Hunt, AIB’s Group chief executive, said the bank welcomed the decision by the Minister for Finance that will lead to a further divestment of the State’s shareholding in the bank.
“It is an important development in the process of returning the State’s investment in the Group,” Mr Hunt said.
“AIB owes the Irish taxpayer an immense debt of gratitude for its support during the financial crisis. The group’s robust balance sheet, its digital capability and the scale of its operations means it will continue to play a key role in supporting the Irish economy and our customers,” he said.
“The focus of our strategy is to grow and strengthen the Group to ensure we continue generating sustainable returns for all our shareholders,” he added.
“With our share trading programme proving successful in reducing our stake in Bank of Ireland, I am now announcing the restart of our phased exit from the State’s larger investment in AIB,” the Finance Minister said.
“The bank’s financial performance has improved significantly while investor appetite for banks is also recovering, so these conditions provide a supportive environment to reduce our shareholding in the bank over time,” Mr Donohoe said.
“Given the thinner liquidity in AIB shares, I expect the pace of share sales to be slower than what we’ve seen at Bank of Ireland, but it is important that we make further progress on what will be a multi-year journey,” he added.
The Minister for Finance currently owns about 1,930 million ordinary shares in AIB through the directed portfolio of the Ireland Strategic Investment Fund (ISIF).
The State’s total investment in AIB amounts to about €20.75 billion and dates back to 2009 when the Minister for Finance directed the National Pension Reserve Fund (NPRF) to make an investment of €3.5 billion in preference shares issued by the bank.
The NPRF was further directed to invest €8.7 billion in two tranches – in December 2010 and July 2011 – while a capital contribution totaling €6.1 billion was also made by the NPRF and the Minister for Finance.
During the financial crisis, AIB also acquired EBS, which itself had previously been recapitalised and taken over by the State.
In 2017, the Government implemented an Initial Public Offering (IPO) of a portion of the State’s shares in AIB, listing the bank’s shares on the Irish and London stock exchanges.
The IPO resulted in the sale of 28.75% of the bank’s ordinary shares and recouped €3.4 billion for the Irish exchequer.
At the time, the Government said AIB’s IPO and return of value to the taxpayer was possible after the “considerable progress” made by the bank since the financial crisis, returning to sustainable profitability since 2014 and reducing its impaired loans froits m peak by 70% while also building up a strong capital base.
The reorganisation of AIB’s capital at the end of 2015 also marked a significant milestone as it modernised its capital structure and facilitated the consolidation the bank’s shares.
It also allowed for the return of €1.7 billion to the State, which was followed by the redemption of the Contingent Capital instrument in July of 2016, which returned a further €1.6 billion.
Shares in the bank were lower in Dublin trade this morning.