State reaches break-even on Bank of Ireland bailout as shares hit 23c
THE State has reached a break-even point on its €4.7bn bailout of Bank of Ireland for the first time as the bank's shares hit 23c.
With the bank likely to seek new investment in a rights issue before the end of the year in order to buy out the State's remaining preference shares, the Exchequer is on course to at least get back all of the money it put into Bank of Ireland during the crisis.
This depends on a number of factors, including whether NAMA manages to get back what it paid for the Bank of Ireland loans it purchased.
The State's position is in stark contrast to the group of billionaire investors, including Wilbur Ross, who paid €1.1bn for some of the State's interest at just 8c to 10c per share in 2011. Mr Ross, who put in €300m at the time, has seen his stake rise in value by €366m to €766m.
Taxpayers invested a total of €4.7bn in Bank of Ireland during the crisis and have so far got back €2bn in cash, according to the National Pension Reserve Fund (NPRF), which manages the state bank investments.
At the end of last year, the State's remaining interest in the bank was valued by the NPRF at €2.2bn, leaving a paper loss for the State of €500m. At the time, the bank's 15pc stake held through ordinary shares was valued at €500m. Bank of Ireland shares have since more than doubled from 11.4c to 23c this week, adding another €500m to the value of the State's shareholding.
A break-even outcome by the State would be a lot better than the €10bn paper loss it is carrying on the €16bn it put into AIB.
However, this does not take into account the 'opportunity cost' of what it could have made by investing the €4.7bn in something else.