Irish government to begin phased exit from Bank of Ireland holding

Ireland’s government will begin to sell down part of its 13.9% shareholding in Bank of Ireland (BIRG.I) over the next six months, Finance Minister Paschal Donohoe said on Wednesday, marking the state’s first sale of any bank shares since 2017.

Ireland pumped 64 billion euros ($76.3 billion) or almost 40% of its annual economic output – into its banks a decade ago after a property crash had left its now mostly state-owned banking sector requiring the biggest state rescue in the euro zone.

Bank of Ireland was the only lender to avoid majority state ownership and the government has already recouped more than the 4.7 billion euros it originally invested in the bank. Donohoe said the announcement marked the start of a phased exit from the country’s largest bank by assets.

Citigroup was appointed to manage the sale and instructed to target that up to, but no more than, 15% of expected aggregate total trading volume in the bank be sold over the duration of the trading plan, Ireland’s finance ministry said.

The state’s shareholding is worth close to 700 million euros and will not be sold below a certain undisclosed price per share which will be kept under review, the ministry said.

Bank of Ireland shares were 4.5% lower at 4.3 euros by 0735 GMT.

The shares are up 31% so far this year but 45% lower than they were in 2018, before a Europe-wide slump in bank shares.

The government’s trading plan will become operational in the coming days and can be renewed at the minister’s discretion after six months.

The British government sold down its remaining 24.9% stake in Lloyds Bank from 2014 to 2016 in a similar process.

Ireland last recouped part of the taxpayer funds ploughed into its lenders when it cut its holding in Allied Irish Banks (AIB) (AIBG.I) to 71% from 99.9% with a 2017 IPO. It also owns 75% of the smaller mortgage bank permanent tsb (IL0A.I).

Of the 29.4 billion euros put into the banks still trading, 19.2 billion has been recovered by way of disposals, investment income and liability guarantee fees. The remaining shareholdings are currently valued at 5.3 billion euros.

Donohoe acknowledged that the competitive dynamic for Bank of Ireland had “completely changed” following the planned exit of Britain’s Natwest (NWG.L) and Belgium’s KBC (KBC.BR) from the Irish market and that this would be a factor in the sale.

He said it was still possible that the state could make a profit through the sale of its holdings in the banks that are still trading, through there were no imminent plans to sell shares in the other two lenders.

($1 = 0.8384 euros)