DUBLIN Ireland launched its long-awaited initial public offering of state-owned Allied Irish Banks (ALBK.I) (AIB) on Tuesday, offering a 25 percent stake in what is set to be one of Europe's largest bank listings since the 2008 financial crisis.
Dublin rescued the bank in a 21 billion-euro ($23.50 billion) taxpayer bailout that began in early 2009, and it has been considering partly cashing out of its 99.9 percent stake since last year.
A successful flotation would mark another milestone in a dramatic turnaround from a banking and fiscal crisis that wrecked the country's economy a decade ago. The sale could raise about 3 billion euros, taking into account the bank's book value of 11.3 billion euros at the end of last year.
That value has probably risen since then, after another quarter of margin growth, its payment of a 250 million-euro dividend this month and a further 11 percent gain in the value of euro zone banks .SX7E so far this year.
One of Ireland's two dominant banks, AIB returned to profit three years ago. It has cut its huge stock of impaired loans by more than two-thirds since then, and this year it became the first domestically owned lender to restart dividends since the crash.
"The strong progress made by AIB and current market conditions mean that now is the right time to commence this process," Finance Minister Michael Noonan said in a statement announcing its intention to float.
"Today's decision is a significant step in the continued normalization of the state's involvement in Ireland's banking system."
IRISH ECONOMY PLAY
Noonan added in an interview with national broadcaster RTE that the IPO price could be "driven up a little" if Britain's ruling Conservative party wins a strong majority in a June 8 election, giving markets a boost.
The prospectus and price range for the sale are expected to be published days later, in mid-June, the government said.
AIB will list its shares on the Irish and London stock exchanges and seek admission to the main markets of each. The government said the sale was expected to be one of the United Kingdom's largest main market IPOs of the last 20 years.
AIB management has said it has received "huge interest in the Irish story" from investors in recent months, pitching the bank as a rare stock market play focused almost exclusively on the European Union's fastest-growing economy.
AIB is less exposed to Britain's exit from the EU than its main rival, Bank of Ireland (BKIR.I), the state's largest bank by assets, having made just 14 percent of its pre-provision operating profit in the United Kingdom last year.
It is also the largest provider of mortgages in the fast-recovering Irish market, with a 36 percent share of the market by drawdowns, although investors may be wary of a chronic lack of housing supply that could hold the market back.
The bank has so far returned 6.6 billion euros to the state though capital, fees, dividends and coupons.
BIGGEST TEST OF APPETITE
The sale will also represent the government's biggest test of investor appetite for its banks. In 2015, it made 400 million euros by refloating a quarter of the far smaller permanent tsb (IL0A.I) on the stock market.
After a 2008 property collapse, Ireland pumped 64 billion euros into its banks, the most expensive rescue in the euro zone at almost 40 percent of annual economic output. It expects to turn a profit on the half given to the three surviving banks.
The government will use the funds to cut around 1.5 percent from a national debt that at 200 billion euros is still among the highest in the euro zone by most measures, resisting opposition party calls to spend the proceeds on infrastructure projects.
The deal will include a retail offering for those willing to invest at least 10,000 euros and a greenshoe or over-allotment option, meaning the size of the IPO could rise to 28.75 percent if demand proves higher than expected following AIB's debut.
The government also added some additional protection last month when it issued a warrant allowing it to subscribe for as much as 9.99 percent of the bank's stock if the share price doubles 10 years after the floatation.
Bank of America Merrill Lynch (BAC.N), Davy Stockbrokers and Deutsche Bank (DBKGn.DE) are acting as global coordinators for the sale. Citigroup (C.N), Goldman Sachs (GS.N), Goodbody Stockbrokers, JPMorgan (JPM.N) and UBS (UBSG.S) are the bookrunners.
(Editing by Jane Merriman, Larry King)