Michael Noonan was quickly given a reason to think twice about his comment to RTÉ just after the announcement of the AIB flotation on Tuesday evening that a large Conservative majority in this month's UK election could "drive up the price" that investors would pay. No sooner had he said this than a YouGov poll, looking at how seats might break down by constituency, suggested that the Conservatives could end up short of any kind of majority at all.
Of course in the wake of the Brexit vote, UK opinion polls have the same kind of health warning as rating agencies did after the financial collapse. But there is no doubt that looking at the “known unknowns”, the vote next week will be one of the key factors concerning those planning the float.
The risk is that some kind of inconclusive result leads to a period of market uncertainty and dissuades investors from focusing on new opportunities, such as that provided by the AIB float. There is, of course, scope for argument about what an inconclusive verdict might mean for markets. If there is one thing we have learned from the Brexit vote and the election of Donald Trump it is that the impact of political events on financial markets is hugely unpredictable.
Market conditions
Right now, market conditions look reasonably good and the AIB story seems to have gone down well with investors in pre-float discussions. It is a simple model of a bank with a lot of young customers in a growing economy and a decent deposit base to fund lending growth. AIB still has a large, though declining, chunk of bad loans, but there is plenty of room for lending growth in the years ahead as the population rises, house building and sales increase and lending starts to normalise.
Central to the case for AIB is the Irish economic story, and so it is probably best to get the first chunk of shares away in case the Brexit talks go badly and up the risk for the next few years. Provided there are no big upsets from the UK election or other geopolitical events in the next few weeks, the way seems clear for the float. They will be lighting a few candles in the Department of Finance for Theresa May's election campaign.
