One of Bank of Ireland's biggest investors has ruled out taking a stake in AIB when it seeks to IPO later this year or early next year.
Michael Aronstein, president of Marketfield Asset Management, said AIB's problems can't be justified by the state of the Irish economy.
"I tend not to favour companies that are under stress for non-exogenous reasons [exogenous means a stressor that is external rather than internal]."
"And at this point we know Ireland is okay, there's no question of distress" said Mr Aronstein.
Marketfield owned 539m shares in Bank of Ireland at the end of December worth around $190m, making it one of the bank's top ten biggest shareholders. It first bought a stake in 2012.
The recovery of Ireland's economy, Aronstein said, means investors "are not getting the same pricing discounts across the menu of Irish assets" as they used to.
The government has indicated its intention to dilute is 99.8pc stake in AIB later this year or early next year by selling off some of its shares.
The bank, which reports suggest recently selected internal candidate Bernard Byrne as its new chief executive, must first deal with capital restructuring. It is weighing up options for a €3.5bn 2009 bailout loan from the Government which could be changed from preference shares into ordinary shares; and €1.6bn in contingent capital notes. Marketfield also considered but decided against taking a stake in Permanent TSB as part of its recent fundraising, Aronstein said.
The government's reduced its 99pc stake in the lender by a quarter as part of the transaction.
"When push came to shove, at those prices Bank of Ireland was a better bet."
But he is still bullish on Ireland, Aronstein added.
"We're still a big believer in the bank [Bank of Ireland] and in Ireland" said Aronstein.
"We bought into Bank of Ireland around 2012, paying about 8c a share. We met with its management team at a time when the whole world looked like an emergency situation.
"Richie Boucher spent a long time with us. The guy is a rugby player and so we knew he could take a few bashes. I felt he was not only smart enough and had a strong plan, but was tough. Over the years they have said they will do things, and they have done them."
The Mainstay Marketfield Fund targets low double digit returns, "and we are very patient", says Aronstein.
"We have owned Bank of Ireland stock for three years and have held on to other companies for between five and seven years.
"We are comfortable, if a management team has a plan and is delivering, to let them do that."
Sunday Indo Business