Conditions are ideal for AIB flotation, says Noonan

Market conditions look good for the proposed flotation of AIB, according to the Minister for Finance, Michael Noonan, and a decision will be made on whether to proceed “in the coming weeks.”

“As we look at stock markets today, conditions are encouraging, with bank stocks generally trading positively,” the Minister said, in one of the clearest signals yet that the IPO of AIB – its float on the stock market – is imminent. Mr Noonan added that “my officials inform me that the Irish macro-economic story is resonating well with international investors”, a key issue given AIB’s reliance on the domestic market.

He added that he has made no decision yet to proceed with the sale – expected to initially involve about 25 per cent of AIB – adding that he would “make this call in the coming weeks based on advice from my officials, our banking syndicate and our independent financial advisor Rothschild.”

Labour motion

The Minister was speaking on a Labour party motion calling for the sale to be postponed until there was clearance to spend the proceeds of the sale on higher capital investment, rather than repaying some of the national debt. At the moment EU fiscal rules oblige the Government to use once-off revenues to pay down debt, while the Labour Party is arguing the money should be used to fund increased state capital investment.

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Mr Noonan said that the Government was committed to staying within the EU fiscal rules

The Minister has previously said that the May/June period was the earliest option for an IPO of AIB on the stock market. The process would start with AIB itself announcing an intention to float, having received the go-ahead from the Minister.

The float itself would happen within three to four weeks of this announcement, meaning the Government would want to be as confident as possible that markets would remain favourable. No decision was likely before the French election, but with this out of the way, and market conditions favourable, the way seems to be clear for the Government to move.

EU fiscal rules

Mr Noonan said that the Government was committed to staying within the EU fiscal rules “which are designed to avoid the mistakes of the past and ensure that increases in public expenditure are sustainably financed and not funded on the back of cyclical or windfall revenues”.

Ireland’s national debt remained high, he said, at over €200 billion. “It has been said that any proceeds of a sale should not be used to reduce the national debt as it would have little or no impact on the debt-to-GDP ratio. This to me represents flawed logic. It is precisely because the nominal amount of debt is so high that the impact might be considered small; but this makes the need to reduce the debt level all the more pressing.”