Allied Irish CFO Sees Individuals Tapping $3 Billion Share Sale

  • Irish government preparing to sell AIB stake in 2016
  • AIB was told to get `in shape and be ready to go,' CFO says

The Irish government will probably sell some Allied Irish Banks Plc shares to individuals next year as part of a plan to dispose of its stake in the bailed-out lender, Chief Financial Officer Mark Bourke said.

“It is really important that afterward, if it does well, that people can say ‘I did have access”’ to buy shares, Bourke said in an interview in his office in Dublin on Monday. The shares to retail investors would probably be sold through brokers, he said.

The Irish government is preparing to sell a 25 percent stake in AIB, which may raise at least 3 billion euros ($3 billion), according to Fiona Hayes, an analyst at Cantor Fitzgerald LP. That would make it the biggest share sale in a state asset since the 1999 flotation of phone company Eircom. The government already sold shares in Bank of Ireland Plc and Permanent TSB Group Holdings Plc as it seeks to reduce state ownership in the bailed-out lenders.

With Ireland heading into a national election in the first quarter, the government has indicated that it would likely sell a stake in the second half of 2016. Finance Minister Michael Noonan has said he’s confident the state will ultimately recover AIB’s 21 billion-euro bailout during the financial crisis, which left taxpayers with a 99.8 percent bank stake. AIB made its first 1.6 billion-euro installment last week.

‘Effectively Done’

“Our brief from the Minister for Finance for this year was to get ourselves in shape and be ready to go,” said Bourke, 49, who joined the bank last year, having formerly been chief executive officer of financial services company IFG Group Plc. “We are effectively done with all the major balance-sheet restructuring needed.”

Last week, AIB redeemed some of the state’s 3.5 billion euros of preferred stock in the bank and converted the remainder into equity to bolster its financial position. It also cut the number of shares in issue, which ballooned during the crisis amid multiple government bailouts, by more than 99 percent.

AIB, which hasn’t paid a dividend since 2008, will seek to attract investors as a “solid” income stock, although it hasn’t been decided when the company will resume shareholder payments, according to the CFO.

Pay Cap

Irish banks are benefiting from the economy’s economic recovery, with the government forecasting gross domestic product to increase 7 percent in 2015, helping push down the share of bad loans. With demand for loans muted, it may take four years for the volume of the country’s mortgage lending to double to about 8 billion euros to 10 billion euros, Bourke said. The market peaked at 40 billion euros before the real-estate boom collapsed.

AIB’s impaired loans have dropped about 45 percent from their 2013 peak to 16 billion euros at the end of September, according to company filings. Noonan has said it may take at least 10 years to fully privatize the lender.

In the U.K., the government is also preparing a sale of Lloyds Banking Group Plc to individuals at a discount in 2016 as it moves to fully exit its stake in the bank. It also started cutting its stake in Royal Bank of Scotland Group Plc, which was the world’s most expensive bailout at the time.

Even with a share sale next year, the bank has no plans to renegotiate its 500,000-euro executive pay cap with the government, according to Bourke. The bank hasn’t paid any bonus since its bailout in 2009.

“The position for us is very clear -- there’s a cap in place, which everybody understands,” said Bourke. “We are also, as a management and a business, functioning and doing well with the cap in place.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE