The Government is on track to sell its final shares in AIB within months after the bank proceeded with a buyback of €1.2 billion of taxpayers’ shares, following a rally by its stock on Wednesday to within half a cent of the price at which the deal had been agreed.
A transaction had looked doubtful in recent weeks, as AIB’s shares had slumped after the minimum price had been set in late March, amid a global equites slump following US president Donald Trump’s ‘Liberation Day’ tariffs announcement.
The board would have been emboldened to proceed with the deal as trading on Wall Street ended on a positive note on Wednesday, following some volatile trading initially after the Federal Reserve left interest rates unchanged, as expected, and warned of rising economic uncertainty with trade concerns weighing on households. The S&P 500 index closed 0.4 per cent higher.
“We are very pleased to make a payment of an additional €1.2 billion to the State through the buyback of a further tranche of AIB shares,” said Colin Hunt, AIB’s chief executive. “Today’s development represents another important milestone in the process of repaying the taxpayer for their support, the normalisation of the group’s share register and enhancing liquidity in AIB shares.”
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The €1.2 billion buyback has reduced the taxpayer stake from about 12 per cent to 3.3 per cent and brings the total recovered to date by the State from AIB’s €20.8 billion crisis-era bailout to €19.2 billion. The Government’s remaining holding is currently worth about €475 million.
“The State is now no longer the largest shareholder in AIB and through the share trading plan, which continues to be operational, our shareholding will continue to reduce with a clear path to exiting our position in the company over the coming months,” said Minister for Finance Paschal Donohoe.
It is expected that the final shares will have been drip-fed on to the market by the time AIB publishes its interim results on August 1st. It could come sooner if the Government sticks to its form of selling a block of AIB shares in June in recent years.
AIB has also entered preliminary talks to buy back stock warrants that the Government continues to hold in the bank, stemming from its 2017 initial public offering. It said that this could cost €250 million. Based off AIB’s current share price, the State is on track to recoup €19.9 billion in total from the bank.
“On an overall basis, based off current market prices, the State is circa €300 million above break-even on its €29.4 billion investment in AIB, Bank of Ireland and PTSB," Minister Donohoe said.
The Government is likely to lift executive pay restrictions at the bank once the final shares are sold, similar to how Bank of Ireland was released from this crisis-era restriction in 2022 when the State exited its investment in that bank. There is a view that PTSB will also be freed up to set the pay for its executives, to avoid competition issues, even though taxpayers continue to own 57 per cent of that bank. Bonuses above €20,000 continue to be effectively banned.
The minimum price of the €1.2 billion buyback was set in late March at €6.26 – based off of AIB’s prevailing market price at the time and before the global stock market rout that followed US president Donald Trump’s tariffs announcement on April 2nd.
AIB’s shares have fallen to as low as €5.16 since then, though they have subsequently rallied strongly. They jumped as much as 3.3 per cent on Wednesday in Dublin to €6.255 – 0.5 of a cent off the agreed strike price.
