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The State’s winding down of its shareholding in AIB could take decades
By David Murphy, Business Editor
You may have heard of somebody talking up shares, but talking them down is less frequent.
That is what Finance Minister Michael Noonan has been doing by describing AIB’s stock as “overvalued” and attempting to prick the bubble in the share price.
Mr Noonan has been the paving the way for returning the bank to private ownership on a phased basis.
It will be part of the Department of Finance’s plan to slowly recoup the €20bn of taxpayers’ money sunk into AIB at the zenith of the crisis.
It would be the biggest sale of shares in the history of the State and could take as long as two decades to complete.
But the first issue will be to deal with the anomaly of the “overvalued” shares.
The bank has had a market capitalisation of about €50bn but it is valued on the State’s books at €10bn. Sooner or later the shares will have to fall.
That will be painful for the shareholders. Clearly, Mr Noonan is attempting to highlight the issue in advance.
The State owns 500 billion shares or 99.8 per cent of the bank – the remaining 0.2% is owned by ordinary shareholders and has been highly volatile.
The Department of Finance will want to reduce its shareholding. Before it does so, it is likely to bring in private investors to step into its shoes by taking over some financial instruments it holds in the bank.
The State has lent money to AIB through preference shares worth €3.5bn and contingent convertible (CoCo) capital notes worth €1.6bn.
These financial instruments are expensive for the bank and AIB CEO David Duffy is likely to want to replace them with money from private investors – it would also be good first step towards part privatisation.
It is likely Mr Noonan will announce his plans before Christmas.
But some may wonder whether Noonan is behaving appropriately by giving advice on the AIB shares.
It seems that as all the information he gives is already in the public domain he can’t be accused of putting a foot wrong.
In reality it appears the Minister is trying to ensure the Government does not get a lashing from some AIB shareholders who are likely to see their shares tank.
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