Allied Irish Banks completes IPO with €12bn valuation

Ireland has floated one of the banks whose collapse helped push the country to an international bailout, marking a milestone in the country’s economic turnround.

The government raised at least €3bn in the IPO of Allied Irish Banks, which valued the group at €12bn.

The offering was priced at €4.40 per share, raising €3bn assuming no exercise of an over-allotment option, or €3.4bn if it is exercised. The €12bn valuation was in the middle of the bank’s previously announced price-range, and in line with analyst expectations.

Ireland’s government will still hold between 71 and 75 per cent of AIB’s shares after the sale, and expects to slowly sell down its stake in the coming years. The government paid almost €21bn to rescue the bank at the height of the financial crisis, but the government expects AIB to increase in value further, and finance minister Paschal Donohoe said the sale of a first stake “has created a strong platform for the state to recover all the money it has invested”.

The bank says it has already repaid €6.8bn of its €20.8bn bailout, through a combination of fees, interest, dividends, the redemption of some instruments, and other payments. Some experts in Ireland dispute the figures, pointing out that some of the fees, like payments for a government guarantee, were not directly linked to the bailout. They also cite the immeasurable knock on cost to Ireland of rescuing AIB, since it helped push the country into a painful sovereign bailout

AIB hit difficulties when Ireland’s property bubble burst at the start of the eurozone crisis, emerging as the country’s second-most problematic major lender. Dublin was unable to finance the rescues of AIB and other lenders on its own, forcing it to take a €67.5bn bailout from the EU and International Monetary Fund.

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However, the bank’s turnround – it has made a profit for each of the past three years – reflects the strength of the wider recovery in Ireland. Ireland has become the fastest-growing economy in the EU, while household indebtedness is falling significantly faster than in the rest of the Europe.

A report by ratings agency S&P earlier this year said the banking sector has almost completely recovered from the crisis, and the “bad bank” established to bail out the banks is on track to make a profit after recouping almost all the money it spent.

Mr Donohoe, who recently took over from veteran finance minister Michael Noonan – who oversaw the country’s economic recovery and began AIB’s sale process – added:

The successful completion today of AIB’s IPO represents a significant milestone in the government’s long-held policy to dispose of our banking investments, returning them to the private sector over time. The offer was very well received and attracted high demand form investors everywhere it was marketed, reflecting the strength of AIB’s investment story and prospects, and the attractions of Ireland’s vibrant and growing economy.

Bernard Byrne, AIB chief executive, said:

I am delighted that the government has been successful in selling down their first material stake in AIB and raising c. €3bn in the process. This is a landmark day for the bank and puts the total cash paid to the state since its bailout to almost €10bn.

The level of investor interest and support for AIB and Ireland is a great vote of confidence in the strength of the turnaround in the bank and the wider economy. It paves the way for the full recovery of the investment in AIB, over time, as we return to full private ownership.

Retail investors received 10 per cent of the shares which were sold, with the rest going to institutional investors.

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Photo: Bloomberg