Monday 22 December 2014

Noonan unlikely to sell bank stakes soon, Davy says

Published 11/01/2013 | 05:00

The chief economist of Davy stockbrokers does not expect imminent sales of more tax-payer-owned holdings in the banks.

Speculation that more deals could be on the way was fuelled on Wednesday when Finance Minister Michael Noonan said close to €7bn could be raised by selling off more of the non-share investments in Government hands.

However, he did not say when the assets are likely to be sold, or if they could be sold to investors or the bailout funds.

Davy's Connall Mac Coille says a rapid round of market sell offs is unlikely, even after yesterday's sale of €1bn of Bank of Ireland bonds.

Profit

Davy advised the Government on this week's successful sale of bank bonds in a deal that netted a small profit and helped loosen the link between bank and State. As an economist, Mr Mac Coille was not involved in advising on the sale process, however.

The State booked a €10m profit on this week's Bank of Ireland deal because the bonds were sold at above the face value of the securities.

Bank of Ireland is regarded as the least damaged Irish bank, so it would be hard to match the profitable price this achieved with AIB or Permanent TSB.

"There might be a market for similar AIB and Permanent TSB bonds, but there might not," Mr Mac Coille said.

He cautioned against expecting a sale of so-called preference shares in the banks, another kind of security the State took in exchange for rescuing the banks, before a wider banking deal is agreed with the European bailout authorities.

Deal

"Getting a deal (with Europe) could be harder if you sell off the plum parts of the capital structure," Mr Mac Coille said.

The Government is in talks that it hopes will lead to the European Stabilisation Mechanism (ESM) sharing some of the €64bn cost of bailing out the main banks, possibly in exchange for bank stakes.

A number of commentators said yesterday the State had lost valuable income by selling the interest-bearing bonds.

Any loss should be weighed against progress in breaking the link between the banks and the State and demonstrating that the market is willing to invest in Irish banks, Mr Mac Coille said.

The Bank of Ireland contingent convertible capital notes sold by the Government traded higher yesterday, the first day the bonds could be traded on the secondary bond market.

Irish Independent

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