Ireland to Sell Part of $807 Million Bank of Ireland Stake

(Bloomberg) -- The Irish government plans to sell part of its 676 million euro ($807 million) stake in Bank of Ireland Group Plc. over the next six months or so, the latest stage in its bid to recoup the bank bailout that almost bankrupted the nation.

Part of Ireland’s 13.9% shareholding in the bank will be sold through a pre-arranged trading plan that will be managed by Citigroup, Ireland’s finance ministry said in a statement Wednesday.

Up to 15% of the expected aggregate total trading volume in the company is to be sold over the duration of the trading plan and there will be a minimum share price for those sold. No further details were disclosed.

”Today’s announcement marks the start of a phased exit from the State’s remaining investment in Bank of Ireland,” Finance Minister Paschal Donohoe said. “When all cashflows are taken into account the taxpayer has already recorded a surplus on its investment in and support for the bank, even before the sales of these shares are accounted for.”

Bank of Ireland’s shares fell as much as 6.4% in Dublin.

Key Player

The state remains a key player in the Irish financial sector, holding majority stakes in AIB Group Plc and Permanent TSB Group Holdings Plc and the minority holding in Bank of Ireland after bailouts during the financial crisis. Overall the state injected about 64 billion euros into Ireland’s banks. About half of that was spent on the former Anglo Irish Bank and Irish Nationwide, both of which were since wound down.

The government will likely still hold a stake in Bank of Ireland after the six-month sale period, Donohoe told RTE Radio. He declined to say how many shares the government intends to sell.

“Over time, I do aim to be in a position that we are no longer a shareholder in the bank but that is the medium-term objective,” he added.

The government has no imminent plans to sell its stakes in Permanent TSB or AIB, Donohoe told reporters at a briefing in Dublin, though said he would like to see the state’s holding in the banks decrease over time. Medium-term plans will “depend on the environment for Irish bank shares and how they begin to change over time,” he added.

Donhoe said today’s announcement would not impact restrictions on bankers’ pay. “They’re separate policy decisions,” he said.

The state could sell about two thirds of its Bank of Ireland holding over the next six months, Goodbody analyst Eamonn Hughes said in a research note. “The stake sale must be seen as an important step in the normalization of the domestic banking system,” he said.

Read more about Ireland’s stakes in its banks

So far, Ireland has recovered 19.2 billion euros of its bank bailout in cash by way of disposals, investment income and liability guarantee fees, the finance ministry said. In the case of Bank of Ireland, the government has already recouped 5.9 billion euros, against 4.7 billion euros invested in the bank.

What Bloomberg Intelligence Says:

The Irish government’s intended sale of part of its 13.9% Bank of Ireland stake could increase the marketability of the company’s shares, but the 30% year-to-date share-price rally may be a stumbling block, in our view. The move nevertheless confirms confidence in Bank of Ireland’s outlook (given the expected economic recovery and reduced market competition), though excess liquidity and a virus-driven repetition of business disruption remain a drag on revenue growth.

-- Lento Tang, BI banking analyst

“State investment in Bank of Ireland over a decade ago should never have been needed, but we will always be grateful for the support we received,” Bank of Ireland CEO Francesca McDonagh said in a separate statement. “We repaid the taxpayer by 2013, and again thank the State and Irish taxpayer for their extraordinary support.”

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