Tuesday 6 December 2016

AIB sale hangs in balance amid market turmoil, minister admits

Investors fleeing shares in banks, writes Gavin McLoughlin

Published 14/02/2016 | 02:30

Jobs Minister Richard Bruton said the market turmoil was 'a reminder that the recovery is fragile'
Jobs Minister Richard Bruton said the market turmoil was 'a reminder that the recovery is fragile'

The planned flotation of AIB may have to be delayed until at least next year if market turbulence continues, Jobs Minister Richard Bruton has admitted.

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Bruton told the Sunday Independent that the outgoing Government would "wait and see" about the timing of the flotation, adding that it would seek to maximise the value of the State's near-100pc holding in the bank.

"I think we'll wait and see. Obviously, the Government will want to maximise the return on its investment and Michael Noonan will take advice at the appropriate time.

"But I think what's encouraging is we are seeing a return to normality in our banking world and small businesses...are seeing again credit emerging from the banks. We need to build on that."

Bruton said the market turmoil was "a reminder that the recovery is fragile".

Previously, Michael Noonan had signalled his intent to sell a quarter of the bank this year, potentially as early as the spring, if the Government was returned to office.

In a recent interview, AIB boss Bernard Byrne said he estimated that the sale could generate as much as €3bn for the State.

Any delay in selling the AIB shares would mean that a return of the €21.8bn that was pumped into the bank by taxpayers would have to wait.

Just over €1.6bn of that was paid back prior to Christmas due to a partial redemption by the bank of the Government's preference shares and the payment of dividends accrued on them.

Michael Noonan said a full repayment could take another decade but a delay in the initial IPO could push that out even further. Turbulent market conditions would probably mean the bank would be unable to fetch as high a price as might otherwise be the case.

In correspondence with Noonan, Byrne's predecessor David Duffy boasted of returning the bank to sustainability.

Sinn Fein has already called for the State to hold on to AIB for at least five years, subject to an application to Europe for recapitalisation.

The Irish and worldwide banking sectors have had a turbulent beginning to 2016.

Bank of Ireland has had about €2bn of its shareholder value vaporised in the year to the close of trading on Friday, while Permanent TSB has lost €1bn.

Outside Ireland, the eyes of the world are on Deutsche Bank, which has lost €8.5bn so far this year amid fears that it may run out of capital.

Investors have been spooked by fears over the state of China, the world's second-largest economy, and the near-untrammelled slide in oil prices. Gold hit a one-year high on Thursday as investors sought safe haven. However, markets rallied on Friday, with banks faring well.

Closer to home, sterling has weakened versus the euro, making Irish goods more expensive in Britain, a major trading partner.

"I have confidence about our future," Bruton said.

"We now have a resilient enterprise base and I think we can weather these storms, but we have to be cautious and we have to be prudent in the way we plan."

Sunday Indo Business

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