Department of Finance officials told the Minister for Finance Michael McGrath that recovery of the full €29 billion the State used to bail out the banks should not be the “overriding consideration” as the exchequer looked to sell off more of its stake in AIB.
Ahead of the latest share sale of the bank earlier this month, a submission for Mr McGrath said the State had now been a shareholder in AIB for 13 years and that it was key to keep reducing its exposure.
A pre-sale submission said: “Our advice for many years has been to gradually reduce our investment in the banks at sensible prices such that we can recover as much of the [circa] €29 billion we put into AIB, BOI and PTSB as possible.
“Full recovery of the €29 billion or what we put into AIB should not be the overriding consideration that drives our decision making. Bank shares are risky and volatile and the State has already been a shareholder in AIB since 2010.”
Mr McGrath was told that “political conversations” about another sale should take place but that as long as these did not include a specific date, they were not considered sharing “inside information”.
“Therefore (if required) we recommend that you seek political clearance in the coming days, and ideally before AIB’s trading statement on November 1st, giving you the ultimate decision and authority to execute a transaction based on our advice and market conditions,” the document said.
A post-sale submission on what was tagged Project Viking VI said the latest sale had yielded €515 million and had reduced the State’s shareholding in the bank to 40.8 per cent. It said another trade was now blocked until at least February of next year although this was seen as too close to the announcement of AIB’s full-year results to allow for another sale at that time.
The submission said: “Department officials will continue to monitor market conditions and engage with [our financial advisers] Rothschild in relation to our next [move]. The AIB FY23 [full year 2023] results will be announced on 6 March 2024 so we cannot sell shares before then.”
The document also explained how officials believed the €3.93 sale price from the early November sale was the highest they could push to “without losing significant orders from long-only investors”.
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It said there had been strong demand for the shares and that AIB had continued to trade well in the aftermath of the bulk sale.
The submission said: “The stock closed 4.8 per cent higher than the placing price on the day following the transaction and remained close to this range for the rest of the week. “That is a good outcome from our perspective — investors need to see the stock trade higher immediately after the transaction.”
Officials also told the Minister for Finance that despite multiple large-scale sell-offs of the State’s AIB stake, the exchequer shareholding was still more valuable than it had been at the beginning of 2022.
“A higher share price and rising free float that improves liquidity is a virtuous circle that benefits the State as seller and ensures that investors remain interested in future sell-down opportunities,” said the submission.
The records were released under the Freedom of Information Act.
