IRELAND: Bank of Ireland returns to fully private ownership: Bank returned above £2 billion bailout bill

editor September 25, 2022 0

The Republic has sold its remaining stake in Bank of Ireland, becoming the first Irish lender to fully return to private ownership following a €64bn bailout of the state's crisis-era financial system.

The sale of the remaining shares brings to almost €6.7 billion the amount returned by Bank of Ireland to taxpayers since they were forced to commit €4.7 billion to the ailing group at the height of the crisis, the Department of Finance said. It is the only Irish bank to repay its aid bill to date.

The recovery, amounting to about €2 billion more than was put into the bank, includes money received from the sale of bank shares, preference stock and bailout bonds following the crisis. It also includes dividends and the collection of guarantee fees.

Taxpayer funds that were spent to save Irish banks should be recovered and put to better use, according to Paschal Donohoe, minister of finance. "This goal for our citizens has been achieved through the gradual sale of the State's investment in Bank of Ireland into a rising market."

The Minister gradually introduced the State's remaining 13.9% ownership in the corporation into the stock market during the past 15 months, which led to the complete exit from the Bank of Ireland. This took advantage of a rise in share value as Ulster Bank and KBC Bank Ireland's impending withdrawals from the Irish market reduced competition and as rising interest rates were anticipated to improve profitability for remaining banks in the following years.

In a separate statement, interim chief executive of the bank Gavin Kelly said, "This is a milestone moment for Bank of Ireland as we move definitively beyond the financial crisis, and is a very crucial step towards full normalisation of our relationship with the State." "The sale of the State's stake in Bank of Ireland has been completed, which is a very positive development for Irish taxpayers, Bank of Ireland, and the sector as a whole."

The discussion now turns to the two remaining banks, Permanent TSB and AIB, where taxpayers are still losing money on their investment, which is expected to reignite the long-running argument over bankers' compensation. Bank of Ireland is still subject to pay ceilings and an effective ban on bonuses that have been in place throughout bailed-out banks since the crisis, notwithstanding its restoration to full private ownership.

The announcement was made less than three weeks after Francesca McDonagh, who had served as CEO for five years, resigned to become COO of Credit Suisse.

Myles O'Grady, the bank's former chief financial officer, has been chosen by the board to become its next CEO, subject to regulatory approval, The Irish Times reported last month. Gavin Kelly, a senior bank executive, has taken over as the organization's acting CEO in the interim.

The stock of Bank of Ireland continues to trade at about a 35% discount to what is considered to be its intrinsic value, or what analysts refer to as its book value, despite the fact that shares have increased by about 65% since the Minister indicated in June 2021 that he was selling down the remaining stake.

This year, Mr. Donohoe has also begun selling shares in AIB, bringing the State's ownership down from 71 percent to 63.5 percent. After a three-month hiatus, he informed the Oireachtas finance committee on Wednesday that he plans to begin selling AIB shares. Of its €20.8 billion bailout debt, AIB has barely paid back €11.1 billion thus far.

Out of Permanent TSB's overall bailout of €4 billion, taxpayers have so far received €2.7 billion. They continue to own 75 per cent of the bank.

Throughout the financial crisis, successive governments invested a combined €29.3 billion in the three remaining banks. Taxpayers have lost €3.7 billion on their whole investment based on what Bank of Ireland, AIB, and Permanent TSB have so far returned to the State, as well as the current prices of the remaining bank interests.

The Central Bank's enforcement inquiry into the lender's role in the widespread tracker mortgage fraud is currently in its advanced stages, which coincides with the sale of the State's remaining shares in Bank of Ireland.

A large portion of the €120 million that the bank has set aside on its balance sheet to deal with remaining tracker issues, as of the end of June, is made up of provisions for an expected fine.

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