Friday 24 November 2017

AIB anomaly makes rescued bank Europe's fifth-largest

Joe Brennan

Allied Irish Banks PLC, the country's second-largest bank by assets, has a market value bigger than UBS and Barclays PLC, even after its third bailout by the government.

The taxpayer last week bought €5bn of shares in the bank for one cent each, giving it a 99.8pc stake.

That left investors with a stake valued at €100m. Allied Irish has since traded at between 9 and 12 cents, for a market value of as much as €61.6bn, three times the peak of February 2007.

"The implied valuation of Allied Irish at about €50bn makes little sense and seems to be an anomaly," said Stephen Lyons, an analyst with Dublin-based securities firm Davy.

"The increase in the government's stake has not been fully digested."

That anomaly makes the unprofitable lender Europe's fifth-largest by market value, behind HSBC Holdings PLC, Banco Santander, OAO Sberbank and BNP Paribas.

The government has injected €19.9bn into the lender over the past two-and-a-half years.

Irish banks are grappling with mounting bad-loan losses, following the collapse of a domestic real-estate bubble in 2007.

Investors would find it easier to "correct the share price to a more reflective level" of its value if a ban on short selling Irish banking stocks, which was introduced in 2008, wasn't still in place, Mr Lyons said.

"Share prices are determined at a level where there are willing buyers and willing sellers," said Ailish Byrne, a spokeswoman for the Irish Stock Exchange.

Allied Irish spokesman Ronan Sheridan declined to comment, while Finance Ministry officials weren't immediately available for comment. (Bloomberg)

Indo Business

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business