Thursday 14 December 2017

AIB valued at up to €13.3bn as warning issued over ECB

Finance Minister Michael Noonan is encouraged by the level of interest. Photo: Doug O’Connor
Finance Minister Michael Noonan is encouraged by the level of interest. Photo: Doug O’Connor

Charlie Weston and Donal O'Donovan

The ECB could veto anyone trying to build-up or offload a major stake in AIB once it returns to private hands, according to a prospectus for investors issued last night.

It comes as advisers running the sale of a 25pc stake in AIB for the Government set the price range for the shares at between €3.90 and €4.90 per share.

The final price won't be known until the stock floats on the market at the end of the month, but the formal guidance pegs AIB shares at far less than the €6.50 a share level the small number of shares that are already traded on the stock exchange were changing hands at yesterday.

At the price indicated last night, the sale of a quarter of the State's stake in AIB will raise between €2.6bn and €3.3bn for the Exchequer.

That is within the range expected, and indicates good demand for the shares.

AIB will be valued at between €10.6bn and €13.3bn, based on the price range that was set.

This is based on the advice from investment banks after they canvassed demand from potential investors.

Bank of America Merrill Lynch, Davy and Deutsche Bank are the global co-ordinators for the AIB share sale, and will earn around €41m in fees.

The final share price is expected to be announced on June 23, the Department of Finance said in a statement.

The Government is selling 25pc of the bank's shares on the Dublin and London stock markets.

Shares are likely to start trading on the stock markets from June 27.

Finance Minister Michael Noonan said: "The time is right to move to the next stage in AIB's IPO process as market conditions remain favourable and I am encouraged by the strong level of interest shown by investors in the offering to date.

"A successful transaction would represent an important milestone in our journey to dispose of our banking investments and ultimately recover all the money the Irish State has invested in AIB."

Retail investors will have to apply for at least €10,000 worth of shares and have an account with a stockbroker to be considered for a share allocation.

A more than 500-page prospectus aimed at investors considering buying AIB shares was published last night, and set out some of the main risks facing the bank - including that Brexit could result in an increase in the level of bad loans held by banks across Ireland, including AIB, while demand for new loans could decline.

AIB already has one of the highest levels of problem loans of any big European bank. At the end of 2016, its €14.2bn of non-performing loans accounted for 22pc of all lending, compared with 9.6pc at Bank of Ireland.

The possibility of tighter lending, higher taxes or even fines and legal settlements that might result from potential bad practices in the past are also raised as risks for investors.

The bank pointed out that under EU rules introduced in 2014, any shareholder looking to build up a stake greater than 10pc in the bank will have to notify the ECB, and wait for clearance.

The new rules will prevent a repeat of Sean Quinn's unseen accumulation of a huge stake in Anglo Irish Bank before the crash, which stunned the bank and its regulators and locked the fate of the country's then richest man and the bank.

Irish Independent

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