AIB stages partial recovery as billionaire Wilbur Ross says he'll sit out PTSB 'waltz'

US billionaire Wilbur Ross, chairman and chief executive officer of WL Ross & Co. Picture: Daniel Acker/Bloomberg

Donal O'Donovan

AIB shares staged a late recovery yesterday, as some investors appeared to set financial reality aside to buy stock in what had been a falling market.

Shares in AIB had fallen by almost a fifth to 7.2 cents each in early trading.

Along with steep falls on Monday, it meant that around €16bn of notional value has been wiped out.

Yesterday, AIB issued a statement to the markets that stopped just short of calling for shares to fall in price, but warned that the bank's stock trades on a valuation multiple that works out at around six times its net asset value as of June 30.

A price roughly equal to net asset value is the median for European banks, it said.

On Monday the Minister for Finance, Michael Noonan, warned that shares in the bank were overvalued by the markets - prompting the current sell off.

Further sharp declines are expected, but the stock staged a late recovery to close at 8.5 cents a share - down just 4.49pc compared to the previous day.

Minister Noonan will bring forward plans by the end of the year setting out the route to reprivatisation of AIB.

Based on current trading AIB shares still trade at a multiple to most banks, including Bank of Ireland, so further dramatic falls are expected.

That privatisation process will dramatically increase the portion of bank shares available to trade from the current minimal levels of less than 1pc.

The sale process, which will be accompanied by a tidying up exercise to reduce the number of outstanding shares, is expected to kick off in earnest during the second quarter of next year.

A process to sell part of Permanent TSB is now effectively also under way.

Yesterday, US billionaire Wilbur Ross, inset, ruled out investing in Permanent TSB, saying he'll "be faithful" to Bank of Ireland.

Wall Street titan Ross famously tripled his money after buying shares in Bank of Ireland in 2011 and selling them this year to scoop around €477m in profits.

He is backing a new fund that will invest in companies here, including lending to the construction sector.

Mr Ross is also involved in efforts to turn around Bank of Cyprus.

In an interview with Bloomberg TV he appeared to rule out making a similar play for Permanent TSB, which is on the road seeking the investment the bank is required to find after failing the European stress tests.

"Having gone to the dance with Bank of Ireland and we had a very good waltz with them, I think we'll be faithful to it," he said.

Meanwhile rating agency Moody upgraded Bank of Ireland's senior debt ratings to Ba1 from Ba3 and deposit ratings to Baa3 from Ba2, yesterday.

It comes on the back of the results of its stress tests.

"The results of the European Central Bank's (ECB) Comprehensive Assessment showed that Bank of Ireland has adequate provisioning levels and would remain sufficiently capitalised to withstand an adverse economic shock under the current transitional capital rules," according to Moody's analyst Carlos Suarez Duarte.

"However, further positive rating pressure is only likely to materialise once Bank of Ireland reduces its still high non-performing loan ratio."