The Minister for Finance received some new year's cheer this week with news that the paper value of the State's holdings in AIB and Bank of Ireland rose by 34 per cent in 2013 to €13.1 billion.

This was largely due to a sharp increase in the value placed on AIB following an independent review by Goodbody Corporate Finance for the National Pension Reserve Fund (NPRF), which manages these shareholdings for the State.

Holding
Figures from the NPRF show the valuation placed on the State's holding in AIB rose to €10.1 billion at the end of 2013 from €6.4 billion a year earlier. The value of the Bank of Ireland stake increased to €3 billion from €2.2 billion.

The NPRF has invested €16 billion in AIB, comprising €3.5 billion in preference shares, €8.7 billion in ordinary stock and a capital contribution of €3.8 billion. To date, it has received nothing back from AIB, according to the NPRF.

Goodbody’s assessment brought AIB preference shares up to face value last year, having previously applied a discount of about one-third, while the value of the ordinary shares increased to €6.5 billion. Each AIB ordinary share increased in value to 1.26 cent from 0.79 cent previously.

AIB is 99.8 per cent owned by the State. The residual shares trade on the Irish Stock Exchange at 14 pence apiece, giving it a notional market value of €72.9 billion.

This has no bearing with reality and is purely a factor of speculative buying by retail investors in the stock not held by the State.