The government of Ireland has announced that it is prepared to begin selling 13.9 percent of its shares of Bank of Ireland. This marks the final phase of the bank’s exit from the market. Citigroup was hired by Paschal Donohoe, Minister for Finance, to slowly trickle shares into the market over the next six months, though this time frame may be extended.
Though Donohoe declined to answer questions regarding the minimum price of the shares and how many will be sold by the end of the year, Davy and Goodbody Stockbrokers’ analysts have made their own estimates. They predict that Donohoe’s plan to only account for 15 percent or less of share trading for the bank in the six month timeframe will result in him selling anywhere between one-third and two-thirds.
In deciding to sell the shares, the Minister intended to send a message that he is confident the economy will bounce back following the pandemic. Despite this confidence, the shares are currently trading at around 40 percent less than their inherent value, leading to questions relating to the timing of the sales. Donohoe continues to assure that citizens’ concerns have been thought of and the shares will not be sold if the price falls below a certain threshold.
The Bank of Ireland had previously been granted a €4.7 billion bailout from 2009 to 2011 due to the financial crisis at the time. Since then, the bank has paid back around €5.9 billion to the State of Ireland. This makes it the only Irish bank to pay back the money owed to state aid.
Bank of Ireland’s stock has significantly increased by more than 200 percent compared to immense lows witnessed throughout the pandemic. Despite these increases, they are still 45 percent below the price they traded at in the beginning of 2018. Attitudes have improved towards the Bank of Ireland due to the plans of Ulster Bank and KBC Bank to exit the market.
Bank of Ireland is in discussion to receive KBC’s performing Irish loan book that holds around €9 billion in mortgages. Though the exit of these banks diminishes competition, there are predictions that the disbursement of loans to the remaining three banks will actually boost the industry.
The chief executive of the Bank of Ireland, Francesca McDonagh, has spoken on the topic as well. Her take is that the decision for the government to sell its stake is a good decision for Irish citizens, Irish economy, and Bank of Ireland.
Donohoe has also reported that the government intends to make cuts to its 71 percent share in AIB and 75 percent stake in Permenent TSB, but did not give a specific time for this to occur because it would be determined by other factors of the market.
Brennan, Joe and Jack Power. “Republic to Sell Down 13.9% Bank of Ireland Stake.” The Irish Times, 23 June 2021, https://www.irishtimes.com/business/financial-services/republic-to-sell-down-13-9-bank-of-ireland-stake-1.4601157.