Treasury Secretary Paschal Donohoe has warned that a hefty fine for AIB over tracker mortgages could come as a “negative surprise” as the state prepares to sell a significant stake in the bank.
Officials explained how two previous attempts to offload a large part of AIB, in November last year and again in March this year, fell at the last hurdle after the “Ukraine War”.
They said June was the right time to sell a large stake in the bank, with “high profile investors” poised to make sizeable deals in AIB stock.
A submission for Mr. Donohoe states that there are already half a dozen institutions that have expressed a firm interest in investing around EUR 50 million each in the bank.
“It’s worth noting that these companies all have quality names and all but one are what the industry describes as ‘long only’ ie your traditional pension and mutual funds as opposed to hedge funds which tend to have a short time horizon. ‘ the advice says.
A detailed June filing told the finance minister that the state should consider selling a stake worth around €300 million in the bank, which accounted for about 5 percent of the company.
This could be increased to as much as 350 million euros if “demand is strong,” officials said.
The filing also warned that there “could be roadblocks” leading up to June as it was the end of AIB’s fiscal half.
It added: “More importantly, we believe AIB’s tracker penalty could be announced by the central bank on Tuesday 21st [of June] or otherwise next Wednesday or Thursday.
“This is essential information and given the risk that it could represent a negative surprise, we should not seek to act in advance.”
The filing also explained how there had been two aborted attempts to sell a large stake in the bank, the first in November last year.
It explained: “Just before launch, we learned that the probable discount [on the share price] would end up being higher than we expected.”
Officials said they were also “well positioned” to consider a sale ahead of the start of the war in Ukraine, following the bank’s results in early March.
AIB’s share price has since recovered on the back of a strong trade balance in the first quarter, the assumption of loans from the Ulster Bank, its €91 million share buyback program and confirmation of rate hikes by the European Central Bank.
“All of these factors mean that investor appetite for the stock has increased significantly, despite ongoing concerns that a recession is brewing in Europe that will hurt banks,” the filing explained.
Another filing – prepared after the sale – said the shares had sold at a price of €2.28, a discount of 6.5 per cent on their June 27 closing price but above the price when Ireland ended announced its first case of Covid-19 in February 2020 (€2.10).
The filing says the 6.5 percent discount is lower than expected and compares well with similar offers.
In early July, AIB’s share price had fallen to €2.09 when the filing was written.
The filing states: “We have been in contact with Goodbody [stockbrokers] around this and they believe the decline is not specific to AIB but rather reflects negative sentiment towards European banks in general.”
https://www.independent.ie/business/irish/paschal-donohoe-was-told-tracker-fine-could-damage-aib-stake-sale-41902029.html Paschal Donohoe has been told the tracker fine could affect sales of AIB shares