Paul Murphy (Dublin South West, Anti-Austerity Alliance)
Link to this: Individually | In context | Oireachtas source

8. To ask the Minister for Finance if he is reconsidering the planned privatisation of the State's share in the banks in view of the recent fall in their respective share prices and if he will make a statement on the matter. [34039/16]

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
Link to this: Individually | In context | Oireachtas source

Is the Minister planning to reconsider the privatisation of the State's share in the banks in view of the significant decline in their share prices? For example, the State's 15% shareholding in Bank of Ireland has halved in value this year so on that basis will the Minister and Government agree to reconsider and not go ahead with privatisation?

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

As the Deputy is aware, the State has a shareholding of 99.9% in AIB, 14% in Bank of Ireland and just under 75% in Permanent TSB. These are valuable assets to the State and it is this Government's intention that the State will exit these investments in a measured and careful manner. That position has not changed. As I have indicated on a number of occasions, my primary objective in the disposal of these assets will be recovering the maximum amount of money for the Irish taxpayer.

As the Deputy notes, there have been substantial reductions in the value of European banking equities during the course of 2016. The weakness and volatility we have seen 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 the sale of any of our banking assets, 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, its future prospects and the outlook for the Irish economy. Officials in my Department continue to 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 move to continue the disposal of these assets in a manner consistent with the plan set out in our programme for a partnership Government.

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 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 and the maturing of the so-called "CoCo instrument" in July of this year, which returned a further €1.6 billion, has now given AIB 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.

Additional information not given on the floor of the House

I welcome the bank's continued strong performance, demonstrating sustainable profitability and strong capital generation over a number of consecutive reporting periods. I would also note comments made recently by the bank's chairman, indicating that AIB may be approaching a 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.

Bank of Ireland returned to profitability in 2014 and has built on this in both 2015 and 2016. The bank has made significant progress in reducing NPLs and growing new business. PTSB has also significantly de-risked its balance sheet under the intensive oversight of various authorities since 2011 through deleveraging, an improved funding profile and increased capital levels. It has made good progress in reducing arrears and returned to underlying profitability in 2015 for the first time since 2007. Financial results in 2016 to date demonstrate that it is both profitable and capital generative.

Given the improved state of the national accounts, progress made in reducing our national debt and positive market sentiment towards Ireland, we are not under any pressure to monetise our banking investments. As a result we have some flexibility around when we time our disposals in the market. So with market conditions being weak at this juncture, we continue to monitor developments and make preparations with the aim of being ready to take advantage of suitable opportunities or market windows when they arise.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
Link to this: Individually | In context | Oireachtas source

That answer basically confirms that we still plan to privatise and will do it at the right time. Obviously, I am against the privatisation and sell-off of these enormously important assets given the potential lever, if under public democratic control, they give in terms of the economy and people's living standards.

When does Minister believe it will be the right time? Will it be soon or is it now being delayed? The Sunday Independentreported that the State valued its holding in AIB at €13.3 billion at the end of 2014, which has been reduced to €9 billion in June of this year. Is that accurate? Are the reports by Focus Ireland that AIB is planning to sell of €1.9 billion worth of buy-to-let properties that are in arrears to vulture funds in order to prepare for privatisation accurate? That would have the potential for thousands of tenants to be turfed out.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

A message was being passed to me and I missed the middle part of the Deputy's intervention. He said something about €9 million or €9 billion.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
Link to this: Individually | In context | Oireachtas source

The Sunday Independentreported that the State valued its holding in AIB at €13.3 billion at the end of 2014 and just €9 billion in June of this year. I also asked about the €1.9 billion worth of buy-to-let properties.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

In common with equity holdings in banks across Europe and in most parts of the world, the value of the State's holdings in the three banks I mentioned is less valuable than it was this time last year. That is just the way the market moved. What are we going to do? We will not do anything with Bank of Ireland at present. I have no plans for PTSB at present. I am asking AIB to continue the preparatory work. There will be no IPO in 2016, but I am holding open the possibility of an IPO some time in 2017, but that will depend on the advice I receive and on market conditions.

It is very difficult to put a value on AIB at the moment because with the State owning 99.9% there is not a real market in AIB shares. Anybody doing an independent valuation of AIB now would find it is worth less than it was worth some time ago, as is every other bank across Europe.

Paul Murphy (Dublin South West, Anti-Austerity Alliance)
Link to this: Individually | In context | Oireachtas source

One consequence of this drive to privatisation could be the sell-off of buy-to-let property loans to vulture funds. Is it accurate that AIB is planning to sell off close to €2 billion worth of those? Could that result in thousands of tenants in buy-to-let properties being evicted as the vulture funds seek to take vacant possession for sale? While I want an answer to that question, the more fundamental point is that instead of privatising these banks - for example selling off AIB in the early part of 2017 at significantly less than what it would have been valued at a year or 18 months ago - we could have these banks in democratic public ownership. They could be used as a lever in the economy. They could be used to have write-downs for those who cannot pay their mortgages, and as a mechanism of developing a productive, green, socialist economy.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I do not have the specific information the Deputy references as having come from a newspaper report about the sale of a loan book involving buy-to-let properties. However, if the Deputy tables a question for written answer, I will get him the information. I do not have it in my brief today and I do not want to speak from memory on it.