The Irish government doesn’t have any plans to unwind its majority stake in Permanent TSB Group Holdings Plc in the short-term, despite more favorable recent market conditions.
(Bloomberg) — The Irish government doesn’t have any plans to unwind its majority stake in Permanent TSB Group Holdings Plc in the short-term, despite more favorable recent market conditions.
Executing the sale of bank shares acquired as part of crisis-era bailouts has been “more difficult than envisaged” even before the impact of Covid-19, according to internal briefing documents prepared by the Department of Finance.
As a result, the government is no longer confident of recouping the €29 billion ($30.99 billion) invested in AIB Group Plc, PTSB and Bank of Ireland Group Plc at least within a five year time frame. The state had planned to recover the full amount invested in the three retail banks over the medium-to-long-term, a target which now “looks unlikely” to be met in the next few years, officials said in notes prepared for Ireland’s new Finance Minister Michael McGrath.
Profitability at PTSB is “still challenged” and the investment case for institutions is “not there right now,” officials said. “Despite very strong progress in reinvigorating the franchise and fixing the balance sheet, the bank has a widely known problem, namely the high capital requirements being set by the regulator.”
Bank of Ireland was returned to full private ownership in September 2022.
Dublin Exits Bank of Ireland 13 Years After Crisis-Era Bailout
The government has been a key player in the Irish financial sector after it was forced to rescue several lenders during the financial crisis. Overall, the state injected about €64 billion into Ireland’s banks, with about half of that spent on the former Anglo Irish Bank and Irish Nationwide, which were since wound down.
The state is running a “fairly large unrealized loss” in AIB and PTSB which was only partially offset by a €2.1 billion surplus achieved on its investment in Bank of Ireland, the ministry said.
As of November 2022, there was a net deficit of €4.4 billion in AIB when the value of the state’s remaining 57% stake and cash received from the business to date was accounted for, with a further €700 million deficit in PTSB.
The state’s strategy has been to prioritize unwinding its position in AIB given the scale of the stake, according to the briefing document. McGrath last week announced a further extension to the AIB share trading scheme which has cut the state’s holding from 71% to 57%.
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