Bank of Ireland returns € 2bn above bailout bill as State exits – The Irish Times

The Republic has sold its remaining shares in Bank of Ireland, making it the first Irish lender to return fully to private ownership following the State’s crisis-era € 64 billion rescue of the 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 which were used to rescue the Irish banks, should be recovered and used for more productive purposes,” Minister for Finance Paschal Donohoe said. “The gradual disposal of the State’s investment in Bank of Ireland into a rising market has been successful in delivering on this objective for our citizens.”

The final exit from the Bank of Ireland was the result of the Minister drip-feeding the State’s remaining 13.9 per cent stake in the company into the stock market over the past 15 months. This took advantage of a surge in the value of the shares as the imminent exits of Ulster Bank and KBC Bank Ireland from the Irish market reduce competition and as rising interest rates are seen boosting remaining banks’ profits in the coming years.

“This is a milestone moment for Bank of Ireland as we move conclusively beyond the financial crisis, and is a very important step towards full normalization of our relationship with the State,” the bank’s interim chief executive Gavin Kelly said in a separate statement. “The completion of the sale of the State shareholding in Bank of Ireland is a very positive moment for Irish taxpayers, for Bank of Ireland, and for the sector as a whole.”

The focus now shifts to the other two surviving banks, AIB and Permanent TSB, where taxpayers remain under water on their investment, and is likely to re-stoke a long-running debate over bankers’ pay. The return of Bank of Ireland to full private ownership does not exempt it from pay caps or an effective ban on bonuses that has been in place across bailed-out banks since the crisis.

The announcement comes less than three weeks after Francesca McDonagh stepped down as chief executive after five years to join Credit Suisse as chief operating officer.

The Irish Times reported last month that the bank’s former chief financial officer, Myles O’Grady, has been picked by the board to become its new CEO, subject to regulatory approval. In the meantime, senior bank executive Gavin Kelly has stepped in as the group’s interim CEO.

While shares in Bank of Ireland have surged by about 65 per cent since the Minister signalled in June 2021 that he was selling down the remaining stake, the stock continues to trade at about a 35 per cent discount to what is seen as its intrinsic value – or what is referred to by analysts as its book value.

Mr Donohoe has also been selling shares in AIB this year, reducing the State’s stake to 63.5 per cent from 71 per cent. He told the Oireachtas finance committee on Wednesday that he expects to resume AIB share selling later this month, after a three-month pause. AIB has so far only repaid € 11.1 billion of its € 20.8 billion rescue bill.

Meanwhile, taxpayers have so far recovered € 2.7 billion out of Permanent TSB’s total € 4 billion bailout. They continue to own 75 per cent of the bank.

Successive governments pumped a total of € 29.3 billion into the three surviving banks during the financial crisis. Based on what Bank of Ireland, AIB and Permanent TSB have returned to the State so far, as well as the current values ​​of remaining bank stakes, taxpayers are € 3.7 billion under water on their total investment.

The sale of the State’s remaining shares in Bank of Ireland comes at a time when the Central Bank is at an advanced stage of its enforcement investigation into the lender’s role in the industrywide tracker mortgage scandal.

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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