Finance Minister Paschal Donohoe was warned that a hefty fine for AIB over tracker mortgages could represent a “negative surprise” as the State prepared to sell a significant stake in the bank.
fficials explained how two previous attempts to offload a large chunk of AIB had fallen at the final hurdle in November last year and again in March this year after the “war in Ukraine intervened”.
They said that the time was right in June to sell down a major stake in the bank with “high quality investors” ready to make sizable trades for AIB shares.
A submission for Mr Donohoe said there were already half a dozen institutions who had indicated a firm interest in investing around €50m each in the bank.
“What is noteworthy is that these firms are all high-quality names and all but one are what the industry describes as ‘long only’, ie your traditional pension and investment funds as opposed to hedge funds that tend to have a short time horizon,” the advice stated.
In a detailed submission from June, the finance minister was told the State should consider selling off a stake worth around €300m in the bank, which represented about 5pc of the company.
This could be increased up to €350m if “demand is strong”, officials said.
The submission also warned that there may be “obstacles to navigate” through June as it was the end of AIB’s financial half year.
It added: “More importantly, we believe that AIB’s tracker fine from the Central Bank could be announced on Tuesday the 21st [of June] or failing this next Wednesday or Thursday.
“This is material information and given the risk that it could represent a negative surprise, we should not attempt to trade ahead of it.”
The submission also explained how there had been two aborted attempts to sell off a large stake in the bank, the first in November of last year.
It explained: “Just before launch, we learned that the likely discount [on the share price] was going to end up higher than we expected.”
Officials said they had also been “well-positioned” to look at a sale after the bank’s results in early March until the war in Ukraine began.
It said AIB’s share price had since recovered due to a strong first quarter trading statement, the acquisition of Ulster Bank loans, their €91m share buyback programme, and confirmation of interest rate rises from the European Central Bank.
“All of these factors mean that investor appetite has increased materially in the stock notwithstanding lingering concerns that there is a recession coming in Europe that will harm banks,” explained the submission.
Another submission – prepared after the sale – said the shares had been sold at a price of €2.28, a 6.5pc discount on their closing price from June 27, but above the price when Ireland announced its first case of Covid-19 at the end of February 2020 (€2.10).
The submission said the 6.5pc discount was lower than anticipated and compared well with similar deals.
By early July, AIB’s share price had fallen and was at €2.09 when the submission was written.
The submission said: “We have been in contact with Goodbody [stockbrokers] around this and their view is that the drop is not specific to AIB but rather due to a negative sentiment towards European banks more generally.”
Denial of responsibility! planetcirculate is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.