Taxpayer more than €1bn short 15 years after bank bailouts
THE taxpayer will be more than €1billion short when AIB and Permanent TSB repay their Government debt 15 years after the bank bailout.
The revelation comes against a backdrop of growing pressure on Minister for Finance Michael McGrath from AIB to abolish the €500,000 pay cap, as Ireland’s biggest bank said private investors find the measure ‘untenable’.
The Government is attempting to sell its remaining 40.8% stake in AIB and its PTSB shares to private investors.
However, a valuation by the Government has revealed this will still leave a gap of €1.25billion between the cost of the State’s bailout and what it received. Private files supplied by the Department of Finance say that when Mr McGrath met AIB chairman Jim Pettigrew last year, abolishing the current €500,000 pay cap for senior bank staff, rather than value for taxpayers, was ‘front of mind’ in Mr Pettigrew’s meetings with investors.
The bank’s chairman said feedback from investors showed restrictions are untenable and, without being addressed, will ultimately impact on the value of the State’s shareholding in the bank. Responding to Dáil questions from Richard Bruton, Mr McGrath also revealed the final bill for the bailout of Ireland’s banks is €36billion.
The main source of debt is Irish Bank Resolution Corporation (IBRC), where the taxpayer secured a return of less than 3% on their investment.
Mr McGrath said: ‘The total recapitalisation of the domestic banks amounted to €64.1billion, of which €34.7billion was invested in Anglo Irish Bank, INBS [Irish Nationwide Building Society] and IBRC, and €29.4bn in AIB, Bank of Ireland and PTSB.
‘To date, €23.1billion of the investment in the three remaining banks has been recovered in cash by way of disposals, investment income and liability guarantee fees.’
As part of this activity, the
State has fully disposed of its investment in Bank of Ireland. Unlike with AIB, the sale of the remaining shares for almost €6.7billion meant the State turned a profit on its €4.7billion bailout.
Fifteen years later, Bank of Ireland is the only Irish bank to repay its State loan so far.
When it comes to AIB and PTSB, Mr McGrath said: ‘The State has made good progress in reducing its shareholding in AIB from 71.1% at the beginning of 2022 to 40.8% today while recovering over €2.8billion as part of that process.
‘With regards to PTSB, in June 2023, it successfully disposed of part of the shareholding in the bank. The disposal was carried out by way of a placing of shares in an accelerated book-building process to investors, carried out in tandem with NatWest.
‘The State sold a 5% stake in PTSB... the State retains a 57.4% shareholding in the bank.’ The remaining shares in AIB and PTSB are valued at about €5billion, leaving a shortfall of around €1.25billion. Mr McGrath said the investment in IBRC – formerly Seán FitzPatrick’s Anglo Irish Bank – of €34.7billion ‘is largely a sunk cost with a net €1.1billion recovered to date’.
Responding to a request by Fine Gael TD Mr Bruton to review the recovery of funds invested to rescue pillar banks, Mr McGrath said the ‘long-standing policy of this Government is to return the remaining banks to private ownership, while achieving value for the taxpayer’. He said the Government believes banking should be provided by the private sector and taxpayer money used to rescue banks should be recovered.
‘State has made good progress’