Business Irish

Tuesday 18 December 2018

Government seeks advisers for sale of its bank stakes

Minister for Finance Paschal Donohoe. Photo: Bloomberg
Minister for Finance Paschal Donohoe. Photo: Bloomberg

Gretchen Friemann

The Government is seeking advisers to help "realise the value" of State-owned bank stakes, in the clearest signal yet that groundwork is being laid to sell its remaining shares.

Investment banks, stockbrokers and financial advisers have until midday on August 7 to tender for inclusion on three advisory panels to help "manage" its shareholdings in AIB, Bank of Ireland and Permanent TSB.

The move will fuel expectations the Minister for Finance, Paschal Donohoe, intends to pull the trigger on a partial share selldown in a lender before the end of the year. AIB is seen as the most likely contender.

The tender process is similar to that conducted ahead of AIB's €3.4bn initial public offering last summer.

The document states that a large "part of the scope of services" for each panel "will relate to the Minister's shareholdings in AIB, Bank of Ireland and Permanent TSB".

Between six and 10 banks may be appointed to the first panel, which is focused on capital market transactions, merger and acquisitions as well as restructuring deals.

Contenders must set out a projected "flat fee" for advice as well as provide fee charges on transactions ranging from €1bn to over €2bn.

Bankers drawn from this panel will "assist in the structuring and execution of a sales process to ensure the State achieves optimal execution in the context of a sale of securities".

The second panel is to provide general financial advice. The third is for book-runners, to manage share sales.

Appointment may span four years and involve a number of mini-competitions, meaning bankers and brokers included on a panel will compete for a role on a deal, there is no reference to any timing of the privatisations.

Since the start of the year the market value of all the Irish lenders has reduced, largely in line with broader market concerns about growth in the eurozone and the prolonged low-interest rate environment.

Yesterday, Bank of Ireland chief executive Francesca McDonagh was pressed on the bank's weak share price performance yesterday by Michael McGrath of the Oireachtas Finance Committee.

Read more: The state of play on bank bailouts

While the group has outperformed the sector benchmark so far this year, the stock is close to 20pc off its 2018 peak of €8.16.

All three of the State-backed lenders are profitable and well-capitalised, but a share selldown in PTSB is unlikely to gain traction given it trades at a near 50pc discount to its net assets.

Instead the market is braced for a merger, possibly with Ulster Bank, once its own balance sheet clean-up is concluded.

Taxpayers have more than €10bn of recoverable value tied up in bank shares, but will still book a near €30bn loss on the bank bailouts because so little will ever be clawed back from Anglo Irish Bank and Irish Nationwide Building Society.

The Government pumped €4.8bn into Bank of Ireland during the crash and since then has reaped over €6bn back, including from fees, share sales and debt repayments. The value of its remaining 14pc stake is worth close to €1.1bn.

At AIB, fees, share sales and debt repayments have raised about €10bn, against the roughly €21bn cost of rescuing the bank. At current prices, another €9.6bn stands to be recouped from selling the State's remaining 71pc stake.

Permanent TSB is the worst performer, relatively, out of the three recovering banks. During the crash the bank received a €4bn lifeline and still owes the State just shy of €1.5bn.

Irish Independent

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