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Five things you need to know about the Government sale of AIB shares

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Chief executive Bernard Byrne

Chief executive Bernard Byrne

Chief executive Bernard Byrne

The Government has launched the sale of 25pc of its stake in AIB, seven years after the bank was nationalised, in what Minister for Finance Michael Noonan described as “a significant step in the continued normalisation of the State’s involvement in Ireland’s banking system”.

We have the five things you need to know about the sale.

1. You will need €10k to buy the shares

In order to buy shares in AIB there will be a minimum investment value set at €10k – the confirmation money may have to be spent on something else.

Also, potential investors in AIB will be required to have an account with a registered stockbroker by June 16.

2. Are they worth it?

It will take approximately two week from now until the share pricing range is disclosed to the market, and between now and then a pre-deal investor education will take place.

Stephen Hall, Investment Analyst at Cantor Fitzgerald, said that it is not possible to give an outlook on the flotation until we know the pricing range of the shares, however the banks underlying fundamentals are positive,

“The bank was very profitable in 2016 and it has repaid its first dividend of €250m to the Irish Government,” Hall said.

However the bank is still facing the issue of the impaired loans. Currently gross impaired loans stand at €8.6bn, and while this figure has decreased considerably from close to €29bn in 2013, it is none-the-less a large figure.

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Added to this, the performance of AIB is very much dependent on the performance of the Irish economy, if the economy dips, then you can expect the share price to also react negatively.

3. Where will the proceeds go?

Proceeds from the €3bn sale of shares will go towards financing the national debt, despite calls from Labour and Sinn Féin to spend the proceeds of the sale on infrastructure projects.

4. There will be no Eircom-like incentive to hold onto the shares

When Eircom, now Eir, and Aer Lingus were floated bonus shares were offered to people who held shares for a minimum of twelve months.

There will no AIB share-incentive arrangement.

5. Remind me, how much did the tax payer plough into AIB?

Seven years ago the Government poured €21bn of taxpayers money into AIB to prevent it from collapsing.

The bank returned to profitability in 2014, and in 2016 the bank made a profit of €1.7bn in pre-tax profits, according to its 2016 annual financial results.


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