AIB said it has spent €390 million buying back stock warrants that the State continued to hold in the bank after selling its remaining shares in the lender during the summer.
The deal brings the total that the State has recovered from the bank’s €20.8 billion crisis-era bailout to almost €20.2 billion – leaving a shortfall of a little over €600 million.
AIB handed the warrants to Minister for Finance, Paschal Donohoe, at the time of the bank’s initial public offering (IPO) in 2017, giving the State the right to buy back a stake of up to 9.99 per cent in the bank if its shares doubled in value in the space of a decade from its €4.40 IPO price.
They were designed to avoid officials being embarrassed in the event of a surge in AIB’s share price after the IPO.
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While the warrants were “out of the money” for much of that period, they reached breakeven point in February as the stock soared following better-than-expected annual results at AIB, which is led by chief executive Colin Hunt.
[ Donohoe delayed approving sale of State’s final shares in AIBOpens in new window ]
“The completion of this warrants cancellation transaction with AIB is a very important step for both the company and the State,” Mr Donohoe said in a statement on Friday. “It is the final transaction with AIB and results in a further €390 million recovered from our investment in the company.”
The price of the deal was €90 million higher that what AIB had estimated earlier this year. Diarmaid Sheridan, an analyst with Davy, said this reflected the subsequent increase in AIB’s share price. The bank’s stock has jumped almost 50 per cent so far this year.
The transaction will reduce AIB’s common equity Tier 1 capital ratio – a key measure of a bank’s ability to withstand a shock loss – from 16.4 per cent, as of the end of June, to 15.7 per cent. Still, it remains well above AIB’s target for a ratio in excess of 14 per cent.
“AIB retains material surplus capital and continues to generate attractive levels of organic capital on an ongoing basis [from retained profits],” said Mr Sheridan.
The proceeds from this transaction will be held within the exchequer and will ultimately be used to benefit the State, he said.
A total of €29.4 billion was invested in AIB, Bank of Ireland and PTSB over the period from 2009 to 2011. To date, about €29.7 billion has been recovered in cash by way of share and bailout bond disposals, investment income, bank guarantee fees and the AIB warrants transaction.
The remaining 57 per cent stake in PTSB is currently valued at about €900 million after shares in the bank jumped 23.4 per cent on Thursday on news that the lender had put itself up for sale.
