What’s happening with AIB and should I care?
To answer the second part first, yes, yes you should care. The State - which is us, really - is selling a quarter of its share of in the bank on financial markets in London and Dublin in the weeks ahead in what is set to be the biggest such sale in Europe so far this year.
Well, that’s good news. How much are we likely to get back?
Analysts are predicting we could be as much as €3 billion better off by the end of June.
€3 billion? That’s not good news, that’s great news! Why aren’t we celebrating?
Because we pumped just under €21 billion into AIB over two years from 2009 to 2011, effectively nationalising it in December 2010. When you add the €3 billion we might get from this sale to the €1.7bn it paid in December 2015 and the €1.6bn repaid in July 2016 and the €3.2bn paid in fees, coupons, dividends and levies as well as a €250m ordinary dividend paid in 2017, the total returned so far is €9.75 billion. That means AIB still owes us over €11 billion.
Oh, right, that is a lot. Why doesn’t Michael Noonan sell the full stake now then?
If he gets €3 billion for a quarter of the shares, would he not get €12 billion if he flogged it all? That’s not really how high finance works is it? Flood the market with shares and the price will plummet but drip feed it and prices are likely to stay higher.
Why now?
Because AIB is in a much better place today than it was at the height of the crisis. For six years from 2008, it was losing money hand over fist. At its lowest point €29 billion - or one third - of its entire loan book was classified as in trouble but it returned to profitability in 2014 and now only - only! - €9 billion worth of its loans are considered troublesome.
Who is likely to buy shares and it is a good idea?
The plan is to sell shares to big institutional investors as well setting aside a portion - between 10 and 15 per cent of the total maybe -to what are described as small investors.
I am a small investor? Can I buy some shares?
Well, it depends. You will need to have €10,000 to spend and an account with a brokerage.
I had shares before all the unpleasantness can I cash them in now?
No, not really. Anyone who had shares in the bank before the crash will have seen their stake massively diluted since then. Following a share reorganisation 250 old shares were converted into one new share. To put that into context, if you had 1000 shares when they were at their peak of €23, you would have been sitting on a cash pile of €23,000. Following the “reorganisation” your shares were worth €92.
When is it going to happen?
By mid-June a price range for shares will be announced and then a final price per share will be made announced following an investor roadshow by all the bank’s top people. The shares should actually be on the market by the end of June.
And what happens then?
The markets will decide that, really.
What is Michael Noonan going to spend the money on?
Nothing. Michael Noonan will not be Minister for Finance at that point and triggering the sale of the shares is likely to be his last major act in that role. What happens to the money is still up in the air. The Government is coming under pressure to use the money to pay off some of our substantial debt - which is still in the region of €200 billion. There have also been calls for the money to be used for infrastructural developments. The likelihood is that it will be a little from column A and a little from column B.
