Sunday 25 February 2018

State suffers €470m fall in value of its Bank of Ireland holding

Bank of Ireland shares have fallen about 15pc since the beginning of 2016
Bank of Ireland shares have fallen about 15pc since the beginning of 2016
John Mulligan

John Mulligan

The State has seen €470m wiped off the value of its stake in Bank of Ireland since the group's shares touched 39 cent in early 2014, as the bank's stock continues to slide.

The taxpayers' 14pc holding in the bank now has a market value of €1.29bn, compared to the €1.76bn it was worth in 2014. It was also worth close to that higher amount last year.

Bank of Ireland shares have fallen about 15pc since the beginning of 2016, declining to just over 28 cent each yesterday. That's 27pc lower than the 39 cent they were trading at in early 2014, just as US billionaire Wilbur Ross started offloading his holding in the group. They were also changing hands at over 38 cent each last March.

The bank's market capitalisation has tumbled from €12.6bn in February 2014 to €9.2bn yesterday. The bank was the only one not to fall into full State control.

That scenario was averted after Wilbur Ross' investment firm, Fairfax, and three other investors paid a total of almost €1.1bn for a near 35pc stake in the bank in 2011. Mr Ross owned about 9pc of the bank, and Fairfax owned over 8pc. They paid about 10 cent per share for the holdings.

Mr Ross sold his entire stake in Bank of Ireland in 2014. In March that year, Mr Ross and Fairfax sold a total of about 2bn Bank of Ireland shares at 32.8 cent a share. In June that year, Mr Ross sold his remaining 5.5pc stake at 26.5 cent per share.

In March last year, Fairfax sold a 2.9pc stake in Bank of Ireland when the shares were at about 38 cent.

Despite the value if the State's stake having fallen, the taxpayer had made a profit of €1.2bn on its original €4.7bn investment in the bank by 2014.

The State made its first investment in the bank in 2009, when the National Pension Reserve Fund bought €3.5bn worth of preference shares issued by the bank.

In 2010, the State converted €1.7bn of that investment into ordinary shares and in 2011 invested another €200m in equity, net of the €1.05bn sale of shares to the US investors including Mr Ross.

The State also invested €1bn in Bank of Ireland Contingent Capital Notes (CoCos) in 2011.

The State also owns almost all of AIB.

But plans for a stock market sale of 25pc of the bank this year could be hit by market volatility.

A PWC report yesterday said an increase in the number of postponed or cancelled IPOs is expected this year.

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