Monday 19 March 2018

National Pension Reserve Fund wants State's AIB stake revalued

Laura Noonan

Laura Noonan

Goodbody hired to find 'independent fair market valuation' of bailed-out lender

THE National Pension Reserve Fund (NPRF) has hired Goodbody to find an "independent fair market valuation" of the State's stake in AIB after deciding that the bank's €66bn market capitalisation is an "inappropriate" benchmark for reporting purposes.

A spokesman for the NPRF confirmed the appointment last night, adding that Goodbody had also been asked to value the State's preference shares in both AIB and Bank of Ireland.

He declined to guide as to how much Goodbody would be paid for the work.

The State has pumped close to €16bn into AIB in exchange for a 99.8pc stake in the bank and €3.5bn of preference shares. The NPRF must value both investments in its end of year accounts.

The 'normal' way of valuing the equity stake would involve using the market capitalisation of AIB, based on the current price shares are changing hands for in the market.

AIB's market valuation is more than €66bn, implying that it is Europe's fourth most valuable bank -- worth more than French banking giant BNP Paribas (€40.5bn), Germany's Commerzbank (€10.6bn) and Royal Bank of Scotland (€29.3bn).


"While AIB shares are traded on a public market, the free float not held by the NPRF is very small and therefore it was felt that it would be inappropriate to base the provisional valuation on the quoted price of AIB shares," an NPRF spokesman said last night.

"The NPRF has commissioned an independent fair market valuation review in respect of both its ordinary and preference share holding in AIB and will include this valuation in its annual report."

Sources added that a similar exercise was carried out last year when Davy's were commissioned to assess the value of its AIB and Bank of Ireland preference shares.

Those instruments were independently valued because they are not traded on the open market.

AIB's market capitalisation has been an anomaly since the bank's latest capital injection in July, when the Government investment €5bn at 1c a share, giving the bank a market capitalisation of about €5.1bn.

Since then, AIB's shares have traded for as much as 14c, vastly increasing the banks notional value.

Market sources describe the trading as bizarre but stress that because volumes of the stock are low then relatively small trades can move prices significantly. Just €259,500 worth of shares changed hands in Dublin yesterday.

(Additional reporting Bloomberg)

Irish Independent

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