The equity value of state-owned Allied Irish Banks (AIB) has fallen significantly this year and it will take Ireland between 8 and 15 years to fully reprivatise the lender, finance ministry officials said in a note published on Wednesday.
Ireland has pumped 20.7 billion euros into the country's second-largest bank, whose chief executive estimated in December that it would take five to 10 years for the government to sell its entire 99.8% shareholding.
Dublin has since pushed back an initial 25% sale to the first quarter of 2017 at the earliest due to unfavorable market conditions. Officials said in Wednesday's note that weak markets had cut the equity value of the bank to 9-10 billion euros from 11.7 billion euros at the end of last year.
"Any recommendation to proceed with an exit event will be predicated on a recovery in stock market conditions and investor sentiment," the 184-page briefing note, presented to Finance Minister Michael Noonan on his recent reappointment, said.
The value of AIB, which is quoted on Ireland's secondary market, has fallen in line with other European banks this year. Shares in Ireland's 75% state-owned permanent tsb are down 53% while 14% owned Bank of Ireland has fallen by 21% this year.
Officials said the state's objective should be to sell its shares in Bank of Ireland without compromising the value of the other banking investments. They said the government could do so via a block sale or an orderly trading plan that the British government used to sell down a significant part of its investment in Lloyds bank.
Given the low underlying profitability at permanent tsb (ptsb), the officials said the outcome of a review into how the state calculates its annual levy on the sector is of material interest to the smallest of the domestically owned banks.
"Any increase in levies will put at risk restructuring plan commitments with the European Commission and could in a worst case scenario render the bank unviable," they said, adding merger and acquisition activity could also drive value and improve long-term viability, without giving any details.
In the note they also commented on an EU investigation into whether Apple's tax arrangements with Ireland gave the U.S. company an unfair advantage, saying a negative outcome could have "significant negative implications in terms of reputation and the creation of uncertainty around our tax system."
In the event of a ruling that Ireland did give Apple an unfair tax advantage, the government would also have to decide whether to go ahead and reclaim tax from the company or wait until the government has appealed such a ruling, which could take years, the officials said. (Reuters)
Source: www.businessworld.ie
