Tuesday 17 October 2017

AIB's value could top €13bn as quarter of shares go up for grabs

Allied Irish Bank’s valuation may reach €13bn. (stock photo)
Allied Irish Bank’s valuation may reach €13bn. (stock photo)

Gretchen Friemann

Allied Irish Bank's valuation may reach €13bn as the government sells down a quarter stake in the nationalised lender in a long-awaited initial public offering.

The bank's shares are expected to resume trading on the Dublin and London stock exchanges at well below the €5 mark - virtually 50pc lower than the spikes witnessed in recent days.

But sources close to the deal have pinpointed €12bn as the most likely valuation.

That would imply a listing price of close to €4.50 per share, roughly half the €9.10 peak scaled last week. AIB's current share prices however are not reflective of the bank's true value since the state owns 99.9pc and trading volumes are wafer thin.

Analysts to the nine banks working on the deal have pitched the bank's market capitalisation as wide apart as €10bn to €13bn, although that range is expected to narrow considerably.

The final price range will be published in a fortnight when AIB's prospectus is lodged to the stock exchanges.

On a media conference call yesterday, chief executive Bernard Byrne described AIB as a "changed bank" and a market leader "in the fastest growing, most dynamic economy" in Europe.

While Mr Byrne said most of the shares will wind up with long-only investors, sources told the Irish Independent the Department of Finance and the nine-strong banking syndicate to the IPO are casting the net wide. A long-running non-deal roadshow, aimed at educating potential investors ahead of the float's official launch, extended to over 300 asset managers.

Close to a third of those approached were hedge funds, sources said. The market was also well briefed about when Minister for Finance, Michael Noonan, intended to fire the starting gun on the IPO.

While a well-orchestrated media campaign ensured the public announcement coincided with evening news broadcasts, bankers on the deal syndicate hit the phones well before then as the pressure to lock in demand for the bank's part-privatisation intensifies.

Investors said they fielded calls fielded from various banks on Tuesday morning requesting meetings about "a large IPO of a European bank".

Sources who have already met with analysts from the banks working on the deal, said dividend growth and special distributions numbered among the key selling points, although these pay-outs are subject to regulatory approval.

The chief risks include the timing and scale of the dividend payments, as well as a potential slowdown in the reduction of the bank's €8.6bn of non-performing loans. Increased competition from rival lenders, weaker loan growth, compressed margins and sluggish housing construction were also singled out as risk factors.

The nine banks are set to collect €10-13m in fees from AIB's IPO.

Irish Independent

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