The Irish government is set to reduce its stake in Allied Irish Banks (AIB) to a 12-year low of 40%, selling an additional 5% of its shares. The sale, estimated at €500 million ($570 million), is part of a series of disposals that have been taking place since the initiation of the Department of Finance's trading plan in January 2022. The plan, which has been extended twice, aims to sell about 1% of AIB shares monthly.
This latest disposal follows another 5% stake sale and a €215 million ($245 million) State shares buyback in June. The move aligns with the government's ongoing efforts to recoup the €20.8 billion ($23.7 billion) bailout provided to AIB during the financial crisis. Upon completion of this sale, total repayments from AIB will amount to approximately €13.6 billion ($15.5 billion).
However, it's worth noting that taxpayers are still facing a shortfall of around €2.9 billion ($3.3 billion). The remaining government stake in AIB is valued at approximately €4.3 billion ($4.9 billion), falling short of covering the remaining bailout funds. The recovery process has included proceeds from a 2017 IPO, smaller share releases, larger block sales, and stock buy-backs.
The share disposal was announced by Finance Minister McGrath after Monday's market close, with no further sales planned for the next 90 days without written consent. Advisors Rothschild, William Fry LLP, and Allen & Overy LLP are overseeing the sale process, which involves placing the shares to institutional investors through an immediate book opening and share price determining process.
In related news, AIB revised its full-year net interest income forecast for the third time this year. Last year's net NII stood at €2.16 billion ($2.46 billion) and net NIM at 2.74%. The bank's excess customer deposits, worth €29.5 billion ($33.7 billion), are currently earning a 4% rate following a series of European Central Bank rate hikes introduced to combat inflation. However, the shift to higher yield savings products has been slow, with 95% of household savings still held in low-yield on-demand accounts.
InvestingPro Insights
According to real-time data from InvestingPro, Allied Irish Banks (AIB) has a market capitalization of $11.4 billion and a P/E ratio of 10.04. The revenue growth for the last twelve months as of Q2 2023 was 14.96%. This aligns with the InvestingPro Tip that AIB's revenue growth has been accelerating.
InvestingPro also offers two other insightful tips about AIB's financial health. Firstly, AIB has been consistently increasing earnings per share. This is a positive sign for potential investors as it indicates the company's profitability. Secondly, despite the company's revenue growth and increased earnings per share, the InvestingPro Tip warns of poor earnings and cash flow that may force dividend cuts. This is significant information for investors who rely on dividends for income.
In conclusion, the InvestingPro platform offers more detailed insights and tips about AIB and other companies. With InvestingPro, investors can make more informed decisions based on real-time data and expert tips.
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