The €3.5bn waiting game at AIB puts Donohoe in sharp focus
AIB's share price got off to a great start in 2018 and by the end of January the stock had hit €5.80. For the Government, which owns over 70pc of the bank or almost two billion shares, it was a strong lift on the €4.40 IPO price in the summer of 2017. Even outsiders with only a passing interest in the markets were wondering when the Government would makes its move to sell more stock, with the share price looking so robust.
Since March, the share price has had a rocky time, dipping down and recovering. But even into August the price was still pinging back above €5 on a regular basis.
Since September things have taken a turn for the worse. On Friday, shares went as low as €3.86 before closing at €4.07, as chief executive Bernard Byrne announced he was leaving, with news coming later that he will join Davy.
At its worst point on Friday that was a fall of €2 a share from the start of the year - the numbers at stake for the Exchequer are enormous. The State's shares were worth €3.5bn more at the start of the year than they were last Friday.
If AIB had managed to sell off even 500 million of its shares early in 2018, the Exchequer could be €1bn better off than it is on paper today. These are crude figures - for example a share sale would require a discount - but in broad terms it illustrates the vast financial wins and losses that have been at stake.
Financial insiders argue that it is unfair to suggest that the Government 'missed the boat' with AIB. Judging the cycle in financial markets is far from an exact science. There would have been a strong argument to suggest that the bank's improving performance would be a bigger driver of share price as AIB restores its credibility and shows it can stand on its own two feet.
Department of Finance officials would have undoubtedly had a duty to monitor the markets and have been advised by both local and international investment houses.
But there has been no political will to move on the banks. Indeed, Finance Minister Paschal Donohoe and his colleagues have had one crisis to deal with after another. His officials will have been spending a huge amount of time focusing on Brexit - and rightly so. Other important distractions that have preoccupied the minority Government range from the cervical cancer scandal to the abortion referendum.
Deciding to tackle the thorny issue of the State's position in the Irish banks has understandably been low on the agenda.
But Byrne's exit from AIB, following CFO Mark Bourke's departure announcement in September, piles the pressure on Donohoe in two ways. It sent the share plunging by as much as 10pc. While the slow slide in the AIB share price grabbed few headlines, the sudden plunge last week will inevitably draw attention to the bank's share price and to the Government's inaction.
Byrne's news and the comments of chairman Richard Pym about the bankers' salary controls making Ireland the training ground for competitor banks around the world will also reignite the pay cap controversy.
Market sources think lifting the pay cap is a no-brainer. In their view, it has served its purpose and is now acting as a disservice to domestic banks. Given the experience of the last decade, the public at large unsurprisingly baulks at the notion of multimillion euro pay cheques and bonuses. The are no votes in lifting a pay cap - the strong likelihood is that votes would be lost. Perhaps the solution should be to get the State out of AIB and leave it to act in a wholly commercial manner.
But as we have seen from the bank's share performance this week, that might not be an option for some time.
Job losses are always hard to swallow but at Bord Na Mona, the question should really be why hasn't the hard decision to scale back on peat and its emissions been made before now? Peat has been used as a form of energy for at least 2,000 years, but for the last 20 years there has been an understanding - both here and in other peat-burning countries, such as Denmark - that it is a significant polluter. The Climate Change Advisory Council (CCAC), which provides independent advice to the Government, has been unambiguous in its concerns about peat, particularly its use in electricity generation. Incidentally, Bord na Mona's Edenderry power station and two ESB facilities in the Midlands, where peat is burned, receive State support of around €120m annually through the Public Service Obligation (PSO) levy on electricity consumers.
The 430 redundancies in the Midlands at the semi-State are regrettable, but the decision to scale back on peat is most certainly not before time.
Sunday Indo Business