AIB begins the task of unravelling its complex bank bailout
Bank of Ireland and AIB are both back in profit, but neither is fully back to normal. Unravelling the massive and complex bank rescues of 2009 to 2011 will take far longer than the bailouts themselves, even if the early stages of normalisation allows the Government to talk up its credentials as the guardians of the recovery, just in time for an election.
The flows of taxpayer money into the coffers of the State's two biggest banks during the crisis years made for a complex picture.
All in all, the State invested €20.7bn in AIB, taking a near 100pc stake in the bank, through a range of different transactions that included so-called preference shares, a type of loan, and contingent convertible capital bonds, or CoCos.
Bank of Ireland fared better, receiving €4.7bn, with the State retaining a 14pc stake in the lender. Bank of Ireland has said it has returned around €6bn to taxpayers. AIB in recent weeks has announced a proposed so-called capital reorganisation, which will include the first repayments from its bailout.
Finance Minister Michael Noonan has said AIB is set to repay about €4bn of its €21bn bailout over the course of the coming year.
And that doesn't include the money that would be recouped from the plan to sell about 25pc of the Government's stake, which is expected to take place after the election.
The repayment plan is as complex as the methods used to put the money in, and you'd be forgiven for thinking it's designed in such a manner to confuse the taxpayer.
The capital reorganisation takes place in a number of stages. One is the partial repayment, through the raising of cash on the markets, of the €3.5bn in preference shares, a form of loan, given to the bank by the State in 2009. This will result in the payment of close to €1.7bn to the taxpayer.
The remainder of the preference shares are being converted into ordinary shares, at a value of €2.67bn. Fiona Hayes, of Cantor Fitzgerald Ireland, explains that repaying the preference shares in full would have reduced by too great a degree the bank's capital.
"They want elevated ratios before an equity sale," she said.
Another element of the plan is a stock reorganisation that would replace every 250 of current shares with one new share, a move that is already squeezing AIB investors, although the Government has warned that AIB's stock was overvalued. Although the Government owns almost all of the bank, some shares are in private hands. Over two days last week, AIB's stock halved in price.
Having reached agreement with the Department of Finance on the terms of the proposed capital reorganisation, AIB has issued notice of an EGM to seek shareholder approval for the proposals - a rather meaningless exercise given that the State holds virtually all the shares anyway, although it will provide an opportunity for private shareholders to air their views.
The EGM takes place on December 16.
AIB chief executive Bernard Byrne has refuted suggestions that politics has had anything to do with the decision to begin the repayment of its bailout.
The time is simply right, he argues. Whatever the reason, it comes at an opportune time for the Government as it moves into election gear. The question most voters will want to know is can all the money put into the bank be recovered?
Mr Noonan is confident it can be.