Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I propose to take Questions Nos. 10 and 32 together.

The State has a shareholding of 99.9% in AIB. This shareholding is a valuable asset to the State and it is the Government's intention that the State will exit this and our other banking investments in a measured and careful manner. As I have indicated on a number of occasions, my primary objective in the disposal of those assets will be recovering the maximum amount of money for the Irish taxpayer.

I have indicated in the past that an IPO is likely to be the optimal route to recouping value from our investment in AIB. At the beginning of this year officials in my Department appointed an independent financial adviser, following a tender process, to assist with analysis and exit planning and much of the initial preparation has now been completed. The reorganisation of the bank's capital at the end of 2015 which allowed for the return of €1.7 billion to the Exchequer, the consolidation of the bank's ordinary shares and the maturing of the contingent convertible or so-called CoCo instrument in July of this year, has left AIB with a simplified market-facing balance sheet. The bank's CEO also indicated recently that much of the internal preparation that would be required in advance of launching an IPO process has now been completed. In addition, I also welcome the bank's continued strong performance, demonstrating sustainable profitability and strong capital generation over a number of consecutive reporting periods. I also note the recent comments made by the bank's chairman indicating that AIB may be approaching the time when the board will be in a position to consider the payment of a prudent dividend, in consultation with the regulator, which would contribute to the bank's strong investment case.

Nonetheless, given the complex nature of an IPO process, the need to access certain IPO "windows" and the recent volatility seen in stock markets, I now deem it more likely that a market event involving AIB would occur in 2017, rather than 2016. Given the strong state of the national accounts, progress made in reducing our national debt and positive market sentiment towards Ireland, there are no structural factors that would require the State to recoup the value of its banking assets in a constrained time period. The State is in a good position to consider the divestment of some of its shares in AIB, through an IPO, if and when we deem market conditions to be amenable.

It would not be possible or prudent for me to estimate the amount which might be received from any future sale of shares in AIB. As the Deputy may be aware, the shares in AIB that are currently freely held amount to only a tiny proportion of the bank's total shares. It is therefore an illiquid share with a distorted valuation, and so cannot be considered a valid indicator of how the market would value AIB in an IPO. I note that we have seen substantial reductions in the value of banking shares in the course of 2016, including those banks that could be considered AIB's peers. The weakness and volatility we have seen in banking equities this year reflect market concerns around Brexit, and a prolonged period of low and negative interest rates, as well as uncertainty around the strength of global economic growth. Clearly, in order for us to proceed with an IPO, we would need to be satisfied that the market is prepared to put a fair and reasonable value on the business, bearing in mind its current performance and future prospects and the outlook for the Irish economy. Officials in my Department monitor market conditions and the performance of banking equities on an ongoing basis. When I deem conditions conducive to recovering value for the Irish taxpayer, I will notify AIB and move to ready a market event.

As I have previously indicated, all capital returned from the State's investments in the Irish banks will be used to reduce the national debt. That is the prudent course of action as it reduces our ongoing borrowing costs and ensures the future strength and stability of the economy.

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