Ireland’s National Pension Reserve Fund hired Goodbody Stockbrokers to review the valuation of its holding in Allied Irish Banks Plc (ALBK) because the bailed-out lender’s market value, now at 66 billion euros ($86 billion), is “inappropriate” for the agency’s accounting purposes.
The fund, which funded three-quarters of the state’s 20.7 billion-euro bailout of Allied Irish in the past three years, put a preliminary 1 euro-cent value on the stock at the end of December, said David Clerkin, a spokesman for the NPRF in Dublin. Allied Irish trades at 12.9 cents today after soaring 85 percent this year. Bank of Ireland Plc, the nation’s largest bank, rose 62 percent to 13.2 cents this year.
“AIB’s recent share price is comical, as the moves closely reflect the recent strong performance by Bank of Ireland, despite the diverging fortunes of both banks,” said Stephen Lyons, an analyst with Dublin-based securities firm Davy. Bank of Ireland is 15.1 percent state owned. “An implied 66 billion- euro market cap more than covers the recapitalization cost of the entire Irish banking system.”
The trading anomaly first emerged in August, following the state’s most recent capital injection into Allied Irish at the end of July. At the time, the NPRF bought 5 billion euros of new shares in the bank for 1 cent each, in an accord that valued group at about 5.1 billion euros. The government owns 99.8 percent of Allied Irish following its bailout.
“The NPRF has commissioned an independent fair market valuation review in respect of both its ordinary and preference share holding in AIB and will include this valuation in its annual report,” Clerkin said.
Allied Irish is Europe’s fourth-largest bank by market value, behind HSBC Holdings Plc (HSBC), Banco Santander SA (SAN), and OAO Sberbank (SBER) and it’s “inappropriate” to rely on its quoted share price, as the amount of tradable stock is very small, Clerkin said by e-mail.
The bank’s price “makes little sense and reflects a continuing ban on short-selling of its shares,” and the fact that it is thinly traded by retail investors, with no institutional stock changing hands, Davy’s Lyons said.
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