The state owns 99.8 percent of the Dublin-based lender after injecting 21 billion euros ($28.6 billion) from 2009 to 2011 as the bank’s bad loans soared amid the worst real estate crash in Western Europe. A sale of shares would help set a value for the bank, he said.
“There’s a political timetable as well,” Noonan, 70, said in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland today. “The government will have an election at the latest at the end of March, early April 2016, so we might test the market sometime ahead of that.”
The nation’s banks, which needed a 64 billion-euro state bailout, probably won’t have to raise more capital after European stress tests this year, Noonan said. While the rescue helped pushed national debt to 120 percent of gross domestic product, that will fall as the government runs down its cash reserves and the value of its bank stakes rise, he said.
Should the government seek to sell its holding in Allied Irish in coming months, it may raise about 4.5 billion euros, according to Ciaran Callaghan, a fixed-income analyst at Merrion Capital in Dublin.
“A strategy of selling down the position over a number of years in more buoyant market conditions and when the bank’s franchise is stronger and generating healthy profits is likely to gain more political traction,” Callaghan said in a note.
Last week, Moody’s Investors Service raised the nation’s credit rating back to investment grade, saying it expects the government to “provide very little, any, of the capital that the Irish banks may need” after European tests. All three of the main credit ratings companies now rank Ireland, which exited a three-year international bailout last month, as investment grade.
“Certainly there won’t be a call on the state to provide capital” to the financial system, Noonan said, adding he was hopeful of winning further ratings upgrades.
Noonan has already more than recouped the 4.8 billion-euro cost of rescuing Bank of Ireland Plc, the largest lender, since 2009. The government has collected 5.9 billion euros from the lender, while retaining an almost 14 percent stake, valued at about 1.35 billion euros.
While Noonan said he doesn’t expect to fully privatize Allied Irish before the election, Bank of Ireland (BKIR) is different.
“It’s a question of what price we’d actually sell” the Bank of Ireland stake, he said. “But we’re under no pressure.”
Allied Irish said on Nov. 14 it has seen signs of stabilization in the quality of the bank’s loans and that the pace of growth in customer arrears was slowing. Allied Irish rose as much 2.9 percent in Dublin trading today.
“With the state having 99 percent of the shares, we don’t really have an established market price on the shares,” he said. “But having done that, we’ll measure it but there’ll be no suggestion of a fire sale.”
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