Photographer: Crispin Rodwell/Bloomberg

Irish Bankers Ramp Up Taxpayer Payback as AIB IPO Finally Set

  • Finance minister says state might make profit on AIB bailout
  • Noonan to sell 25% stake in lender for about 3 billion euros

Ireland’s drive to recoup money from the bank rescue that almost bankrupted the nation is finally gaining pace.

The Irish government on Tuesday started the process of selling 25 percent of Allied Irish Banks Plc, after spending 21 billion euros ($23.5 billion) bailing out the lender following the 2008 financial crisis. In comments aired on Wednesday, Finance Minister Michael Noonan suggested the state may even eventually make a profit on its investment in the bank, even though it may take a decade to fully privatize the lender.

In all, taxpayers injected 64 billion euros into the nation’s financial system, in what the International Monetary Fund called the costliest banking rescue since the Great Depression. The burden of saving the banks eventually forced the nation into an international bailout, and seven years later, the state is still out of pocket. The government’s remaining stakes, added to the money generated by owning them, amount to about 28 billion euros.

So far, AIB has repaid about 6.8 billion euros through channels such as fees and dividends. The share offering in London and Dublin next month will raise about 3 billion euros, with terms to be set in mid-June.

Analysts at banks working on the IPO value the company at about 10 billion euros to 13 billion euros, people familiar with the matter said. The final value will depend on investor feedback, they said.

“If you look at the history, four years ago people were worried about putting in more capital -- that was the fear,” AIB Chief Executive Officer Bernard Byrne, who took over in 2015, told reporters Wednesday. “We’ve gone into the ballpark at this stage, so that’s a good place to be.”

Still, calculating the real cost of bailing out the banks means looking beyond the 64 billion euro figure. Ireland introduced a snap guarantee in September 2008 of almost all its banks’ liabilities, totaling about 440 billion euros, weeks after the collapse of Lehman Brothers Holdings Inc. sparked a global financial crisis. That drove up the state’s cost of borrowing money on international markets, adding to the taxpayer’s bill.

And while the government has vowed to recover the expense of saving what it describes as the “living banks” -- AIB, Bank of Ireland Plc and Permanent TSB Group Holdings Plc -- it won’t ever recover the estimated 30 billion euros injected into Anglo Irish Bank Plc. The lender is being liquidated.

In fact, one likely use of the proceeds from the AIB sale next month, according to Cantor Fitzgerald: paying down the legacy debt associated with Anglo Irish.

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