Wednesday 18 October 2017

Donohoe may seek Dáil deal to sell off more chunks of AIB

Minister Paschal Donohoe has insisted that the proceeds from the sale of AIB, headed by Bernard Byrne, above, would be used for debt reduction, regardless of European Union rules.
Minister Paschal Donohoe has insisted that the proceeds from the sale of AIB, headed by Bernard Byrne, above, would be used for debt reduction, regardless of European Union rules.
Donal O'Donovan

Donal O'Donovan

Finance Minister Paschal Donohoe said he may push to sell more of AIB sooner than planned, after yesterday's part-privatisation of the bailed-out bank completed without a hitch.

Selling more of the bank would require sign-off from the Cabinet, including Independent TDs.

Bernard Byrne, AIB's CEO, described the successful listing as a "landmark day for the bank", and said the State had now recovered "almost €10bn" of the €21bn cost of bailing out the country's biggest bank seven years ago.

The shares priced initially at €4.40 each, the midpoint of a range guided by investment banks running the deal. The sale of the 25pc stake valued AIB at €12bn.

A rise of as much as 7pc in AIB's shares in the immediate wake of yesterday's share sale prompted Social Democrat TD Catherine Murphy to accuse the Government of "selling off the family silver", though the price move was short-lived, and market sources said was driven by funds that missed out on the initial share allocation looking to buy into the deal.

Banks running the process for the State can now take the opportunity of continued investor demand to sell an additional 3.75pc of the lender, in what is known in the markets as a "green shoe".

It means the Exchequer will take in €3.4bn in cash, in all.

The cash will go to reduce the national debt, in line with European budget rules and the views of recently retired finance minister Michael Noonan.

Mr Donohoe and Taoiseach Leo Varadkar have both indicated their preference for a looser approach to spending in recent weeks, but yesterday both insisted the AIB proceeds would be allocated for debt reduction.

Commenting at the close of his first EU leaders' summit in Brussels, the Taoiseach said paying down debt was "the prudent and right thing to do", since the bank rescue funds were borrowed money to begin with. EU public spending limits were separate to the decision to pay down debt, he said.

Mr Varadkar said he wanted to see more public infrastructure investment, but that it had to comply with EU limits. He also argued that increased public spending of itself did not necessarily boost infrastructure delivery, as it also risked fuelling inflation.

Mr Donohoe said the money should be used to reduce debt, regardless of EU rules, "but if those rules were not there, I would still argue that the right thing to do is, when we have the ability to get down our debt, we should do it". He said taxpayers' overtime would recoup all of the money pumped into AIB after the crash.

Labour leader Brendan Howlin, however, said debt reduction would "deliver no meaningful benefit to the Irish people".

"At a time when we have a major housing crisis, and when there are calls for substantial additional investment in hospitals, in schools and in public transport, this isn't good enough," he said.

The national debt shot up five-fold after the crisis to around €200bn.

After the share sale, Mr Donohoe said he would revisit a policy set out in the programme for government to sell a maximum 25pc of any State-owned bank by the end of 2018, should the right opportunities arise.

That would mean seeking political approval, in particular from Independent TDs supporting the Coalition.

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