AIB in talks to buy back some State shares after €645m profit

AIB in talks to buy back some State shares after €645m profit

AIB said on Thursday it is in talks to buy back some of the State’s shares in the bank as part of a plan to hand over €213 million to shareholders though dividends and stock repurchases.

It follows on from the bank swinging into a net profit of €645 million for 2021, compared with a €741 million loss for the previous year, as it started to free up some of the €1.46 billion of bad loan provisions taken during the worst of the Covid-19 crisis .

Still, the release of €238 million of loan provisions was more than offset by AIB booking €318 million of exceptional costs last year. These included €100 million to compensate investors affected by a failed series of boom-time UK commercial property funds, known as the Belfry Funds, as well as restructuring costs.

AIB, led by chief executive Colin Hunt, is now planning to return to paying dividends after a two-year hiatus during the pandemic, with €122 million set to go to shareholders by way of ordinary dividends. The Government owns almost 71 per cent of the bank.

The bank said that it has also ring-fenced €91 million to repurchase some of the taxpayer shares and is in talks with Government officials about executing the plan, in what is known as a directed buyback.

“Today I am pleased to announce that AIB Group delivered a strong performance in 2021 with a return to profitability and €213 million of proposed distributions for our shareholders,” said Mr Hunt. “It was a year of very significant progress across the group despite uncertainties related to the Covid-19 pandemic.”

Signalled

AIB executives had previously signalled to analysts in November that it was unlikely to start handing back excess capital to shareholders in 2023, beyond returning to regular dividends.

That was because the group would be concentrating on bedding in its recent acquisition of Goodbody Stockbrokers, investing in a life and pensions joint venture with Canada Life, and completing its planned purchase of €4.2 billion of corporate and commercial loans from Ulster Bank, as the latter exits the market.

“The standout positive was the return to distributions and the fact that regulatory approval has already been secured for a buyback is particularly noteworthy,” said John Cronin, an analyst at Goodbody.

The Government had started to sell down some of its shares in AIB in January in a drip-feeding exercise that was on track to reduce its holding to about 68-69 per cent by the middle of the year, according to analysts. A buyback of €91 million of shares would reduce holding by a further 1.4 per cent, based on AIB’s current share market value.

The State has so far recovered a little over half of AIB’s €20.8 billion crisis-era bailout.

AIB’s non-performing loans (NPLs) fell to 5.4 per cent of its total portfolio in December from 7.3 per cent a year earlier, driven by the sale of loans in long-standing arrears. Three-quarters of the remaining €3.1 billion of NPLs mainly related to debt affected by the pandemic.

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