The country’s largest stockbroker has called for a change in strategy to speed up the privatization of AIB after more than a decade of state ownership.
In a note to institutional investors on Tuesday, Davy suggested that AIB should begin “big buybacks,” particularly of stocks controlled by the National Treasury Management Agency (NTMA), in a bid to reduce the government’s stake below 50 percent faster .
Such a plan would quickly reduce state ownership while leaving private shareholders untouched, giving them greater control over the bank.
It would also more quickly repay some of the outstanding billions pumped into AIB when the taxpayer came to its rescue during the financial crisis.
“To more meaningfully accelerate the sell-off, large buybacks are needed,” said Diarmaid Sheridan, senior banking analyst at Davy. “Establishing a meaningful buyback where the state participates through a directed buyback along with an accelerated bookbuild would reduce the state’s share more effectively than neutral buybacks and 3-4 accelerated bookbuilds per year.”
Davy’s call follows the state’s successful listing of €396.6 million worth of AIB shares on Monday and Tuesday, reducing his stake to 57 percent.
The tranche represented 5 percent of AIB’s total shares and 8 percent of the government’s remaining stake in the bank.
The deal was the latest in a series of drip sales and big selloffs that have slashed the state’s position in the bank from 71.1 percent at the start of the year.
Tuesday’s placement, however, prevents Treasury Secretary Paschal Donohoe from selling any more blocks of AIB shares for 90 days without permission from the investment banks that conducted them. The lockdown also applies to the minister’s drip feed trade plan, but only for 60 days.
This means that the next possible AIB share sale is possible in January at the earliest. Tuesday’s sale came after the 90-day lockdown period, which followed another 5-unit sell-off in June.
“The State retains a 57% ownership interest in AIB and will continue to review additional share sales opportunities as they arise after the three-month lockup period,” Mr. Donohoe said.
AIB has historically used buybacks to reduce government involvement and return capital to investors. A €91 million buyback program, conducted from June 2021 to May 2022, had a large, targeted component and brought the state’s position below 70 percent. Buybacks are also an efficient way of allocating capital that serves the interests of the taxpayer as the largest shareholder.
But large trade sell-downs like the one completed on Tuesday have the benefit of being controlled by the main shareholder, not the bank, and don’t require European Central Bank approval like buybacks do.
Many long-only investors are known to be interested in investing in AIB, so there is demand.
“The improved liquidity is welcomed by AIB shareholders and the increased free float is constructive in attracting new investors to the name,” said John Cronin, analyst at Goodbody Banks.
