Collapse in US Bank Shares shows Folly of AIB Flotation

With US bank shares falling by over 10% in recent weeks, Labour spokesperson on Finance Joan Burton has said it highlights the folly of proceeding with the flotation of 25% of AIB. This follows the news of a potential fire sale of bad loans to make the bank more attractive.

Deputy Burton said:

“The business case put forward by Minister Noonan and the Department of Finance for the flotation of AIB shares has been seriously undermined in the last week, and highlights the folly of proceeding with an IPO at this time.

“In the US bank shares are approaching bear market territory with Goldman Sachs falling 16.5% since March; Wells Fargo is down 14%, with Bank of America and JP Morgan both down 12% from March highs.

“It was also reported today that AIB plans to reduce its bad loan book by €6 to €7 billion which has the potential to cause huge havoc and distress for many Irish families and businesses as the bank tries to improve its attractiveness to investors.

“The commitment this week by the ECB President that the policy of cheap money, quantitative easing is still needed in the Eurozone for some time, will also put pressure on bank profits in a low interest environment.

“Another of the key reasons put forward by Minister Noonan for a quick sale was the likelihood of a strong Tory majority in the UK election. However as the British election campaign has ramped up, the strong and stable has become weak and wobbly, and polls have consistently shown a tightening of the race between the Conservatives and the Labour Party.

“The ongoing weakness of sterling and the huge risk from Brexit will also likely depress the possible price achieved.

“The Labour Party has called for the Minister to postpone the sale of the shares until the fiscal rules are changed to allow for the proceeds to be invested in the Irish economy where significant infrastructural bottlenecks exist in housing, health, education and transport.”