It’s payback time, says George Osborne

As Michael Noonan evaluates options to get a return for the State on its €20.8 billion bailout of AIB, his UK counterpart, George Osborne, has given a clear signal to voters that he intends to begin to sell down that Government's 81 per cent stake in Royal Bank of Scotland if returned to office after the May 7th election.

In an interview with the Financial Times, the chancellor of the exchequer described the stake as "massive" and said it could take years to offload back into private hands. "First, it's not an exact science, but on some measures it's bigger than all the privatisations of the 1980s put together," Osborne said. "Second, I think people want to see they get their money back. The British taxpayer wants to feel they haven't suffered some enormous loss.

“So there are constraints around it, but it’s certainly something I would want to get moving on in the summer after the election. I would want to see a review on a plan for disposal.”

This chimes with an interview that Ross McEwan gave to The Irish Times last December, when he indicated that it could take five to 10 years for taxpayers to get their money back.

Osborne and McEwan’s comments are instructive in terms of the re-privatisation of AIB.

There’s a growing narrative around AIB that now that the bank is back in profit and the Irish economy is in recovery mode, we’ll be able to offload it in jig time to the highest bidder, getting all our money back. Bish-bash-boom.

The reality is somewhat different. While there’s sure to be interest from private investors in AIB, that doesn’t necessarily translate into them writing a €20.8 billion cheque for the business in the near term.

AIB's soon-to-depart chief executive David Duffy told the Oireachtas finance committee last year that it could take 10 years for the State to get its money back.

Noonan will want to get the ball rolling sooner than that and AIB’s decision to pay a €280 million dividend in May on the State’s preference shares is a good start. But it will be long after the next election before AIB will be square with the State.