Tuesday 20 February 2018

AIB denies that plan to begin repaying bailout is tied to politics

Allied Irish Banks chief executive Bernard Byrne
Allied Irish Banks chief executive Bernard Byrne

Colm Kelpie and Donal O'Donovan

AIB chief Bernard Byrne said plans to start repaying part of its €21bn taxpayer bailout this year "makes sense" and suggested politics had nothing to do with the decision.

Mr Byrne said raising between €1.5bn and €2bn "seemed sensible".

The transaction would involve issuing junior bonds known as Tier 2 and Additional Tier 1 notes.

The money raised will be used to part repay €3.5bn of preference shares, a type of loan.

The move, the first time that AIB has returned money to the State, is expected to take place before the end of the year - just months before a General Election.

"Getting the capital structure sorted out makes sense from everyone's point of view," Mr Byrne said.

"You're always going to be very close to an election, somewhere along the way, so I don't think the issue plays, but that's not for me to comment.

"For us, it makes absolute sense to do it now."

Any money recouped for the Exchequer is already earmarked for use in reducing the national debt, which stood at more than €200bn at the end of last year, including rescue loans owed to the European bailout funds.

Mr Byrne wouldn't go into detail about the move but confirmed it would need approval from the Single Supervisory Mechanism (SSM) of the European Central Bank.

"Hopefully in the next number of weeks we should be able to get to a conclusion," he said.

The plan is in line with previous comments from Mr Byrne, who said on October 8 that the bank it will be "paying a very sizeable chunk of capital back to the State in the not too distant future".

He made the comments in a speech at the Dublin Chamber of Commerce annual dinner, to an audience that included Taoiseach Enda Kenny.

Mr Byrne, who took over the top job at the bank this year, said that, in time, taxpayers will be in a position to get back all of the bailout money.

Cantor Fitzgerald Ireland said it believed there would be a strong demand for the AIB bonds.

"Following the capital reorganisation, AIB will be in position to present a clean set of year-end numbers and an elevated total capital ratio (19-20pc) to facilitate the marketing of an initial equity stake - our core scenario is that 25pc of the bank will be sold with the most likely timing being Q2/2016," said Cantor's Ryan McGrath.

"This could return a further €3bn to the state on top of the €2bn expected to be returned this year from the redemption of the preference shares, to be closely followed by a further €1.6bn when the CoCos are redeemed in July."

Minister for Finance Michael Noonan has said that over time the full cost of bailing out AIB, Bank of Ireland and Permanent TSB will be recouped, though at best just a fraction of the €34bn bailouts of Anglo Irish Bank and Irish Nationwide Building Society will be recovered once their liquidation is completed.

The State has already recouped the €4.8bn cost of rescuing Bank of Ireland, and retained a valuable stake in the bank.

Permanent TSB paid back €410m of its rescue loans, and indicated the balance could be repaid by 2018.

That leaves AIB's debt to the State, and Nama, as the Exchequer's big remaining financial sector legacies of the banking crisis.

Irish Independent

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