After today's share sale, how close is AIB to repaying taxpayers for its bailout?
The bank took its first step towards a full return to private ownership today.
THIS MORNING THE government officially got its €3.4 billion windfall from the long-awaited re-float of part of AIB.
The move marks the bank’s first step back towards full private ownership after it was bailed out by taxpayers to the tune of about €20.8 billion during the financial crisis.
The bank’s CEO Bernard Byrne has previously said that the state will get all of the money it pumped into the bank back.
But just how much has the state recouped to date, and how far does AIB have to go to make good on Byrne’s promise? Here’s a quick rundown.
Repayments
Overall, AIB says that it has repaid just over €6.8 billion to the state before the IPO. So even with the IPO included, it’s still about €10.5 billion shy of fully repaying the state.
The first major windfall was in December 2015, when AIB paid €1.7 billion to redeem 1.36 billion preference shares held by the state.
Some €1.6 billion of capital was also repaid in July through financial instruments called contingent capital notes.
The bank said it has also paid the state an additional €3.2 billion in fees, levies and coupons. In March it also announced plans to pay a €250 million dividend to its shareholders – that is, the state.
The proposed dividend was paid in May.
What AIB says it has repaid to the state
However, as reported by the Financial Times, AIB’s figures are open to dispute as fees, like payments for a government guarantee, did not directly flow from the bailout money.
More repayments
The current share sale first saw the government offload 25% of its 99.9% stake in the bailed-out lender.
Investment banks and brokers working on the deal also had the option to buy a further 3.75% if demand for the shares was strong – an option also exercised today, leaving the state holding a little under three-quarters of the bank.
The IPO valued AIB at just under €12 billion, meaning that the government’s remaining stake is worth about €8.5 billion.
AIB CEO Bernard Byrne
At a press conference in Dublin today, Finance Minister Paschal Donohoe said he was pleased with the response to the IPO – adding that it paved the way for selling more of the bank.
It is also likely that the state will be the benefactor of more dividends from AIB in the future, although Bloomberg reported it isn’t expected to resume payments until 2018.
So, by its own calculations, AIB still owes about €10.5 billion. The state’s remaining holding in the bank is worth about €8.5 billion, however it will no doubt hope the value of this share rises. The state could also get more money back in the form of dividends.
Of course, many say that simply repaying the original bailout sum doesn’t count the knock-on effect to the Irish state, such as the cost of borrowing to fund the recapitalisation of AIB and other banks.
However, Byrne’s original promise that the bank would repay all of its bailout is looking quite possible to fulfill.
