Sunday 19 January 2020

State tipped to offload AIB and Bank of Ireland shares

Finance Minister Michael Noonan
Finance Minister Michael Noonan

Colm Kelpie

The Government will potentially sell shares in both AIB and Bank of Ireland next year, specialist bank Investec has said.

Finance Minister Michael Noonan has said the sale of no more than 25pc of AIB will take place next year, but there are no plans as yet for the Government to sell down its 14pc stake in Bank of Ireland.

The minister has said the latter would take place at a time that makes sense for the taxpayer.

But Investec analysts John Cronin and Cian Harty said Mr Noonan could also move on Bank of Ireland in 2017.

"We believe the Government intends to pursue a sale of AIB shares in 2017 (as well as potentially selling more stock in BKIR [Bank of Ireland])," the investor note said.

"We know that Fine Gael is not of the mindset that the State should maintain its interest in the banking sector for the long-term, which is evident in comments made by the Minister for Finance in a recent address.

"However, we do believe the political thought process is that the State has bought itself some time and now has an opportunity to effect the various changes to the banking landscape that it would like to see over the next six to nine months - before a more stable environment emerges again, then paving the way for share sales."

On variable mortgage interest rates, Investec said it does not expect laws to be introduced that would force banks to push down their SVR rates, although it said "material compression" in mortgage rates will occur.

"We have concerns that the banks will be pushed towards providing more generous debt forgiveness terms, though it is highly uncertain how these arrears proposals will play out," Investec said.

Investec said that Bank of Ireland will be the least affected by the government proposals.

And it argued that the bank will seek to preserve its back book mortgage rates.

But Investec added that amid the uncertainty, it is pushing down its Net Interest Margin forecasts by two basis points this year, and four basis points in 2017 and 2018.

At its recent agm, Bank of Ireland chairman Archie Kane gave away no ground on the mortgage rate issue.

He said the bank had focused on the pricing of its fixed rate products and had made it as "easy as possible" for existing customers to move from variable rates to fixed rates.

Mr Kane said that the bank's focus was on its net interest margin. The bank also said it intended paying a dividend to shareholders next year.

Irish Independent

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