Can small investors bank on a return from the AIB share sale?

The near €3 billion AIB share sale is set to be the biggest in Europe this year and the largest stock market flotation of a State asset since Eircom in 1999. Small investors with minimum €10,000 to invest will be able to buy shares but only if they’re signed up with a stockbroker.

Share prices can go up and down and anyone considering buying AIB shares in the offering should first take some advice from a investment professional. But here are a few things that are worth considering.

Déjà vu all over again?

Remember Eircom? About 500,000 Irish residents paid €3.90 per share as they piled into the Government’s heavily-marketed initial public offering (IPO) of the phone group back in 1999 – raising €6 billion. After an initial jump, the shares slumped by more than a third in a little over a year with hundreds of thousands of small investors having their fingers burned.

More recently, institutional investors who bought into Permanent TSB’s IPO in 2015 ago have had a torrid time. Within a year, the stock had lost two-thirds of its value. It remains more than a 33 per cent off its €4.50 flotation price. Can the Government get the pricing right this time with AIB?

Ireland is the fastest growing economy in Europe

This is a positive for investors. With €54 billion out on loan in Ireland, AIB offers potential investors the clearest bet in the banking sector here to the recovering Irish economy, which the European Commission projects will be the fastest-growing in the euro zone for a third straight year in 2017.

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Only 14 per cent of the bank’s loans are in the UK, compared to 40 per cent at Bank of Ireland, leaving it less directly exposed to Brexit.

However, AIB warned in documents published earlier this year for debt investors that the impact of Brexit to Irish trade with the UK, particularly in the agriculture and tourism sectors. It said sterling’s weakness “could have a material adverse effect” on the group.