Wednesday, January 9, 2013

€14 billion in Bank Assets

Today’s sale of a €1 billion contingent convertible capital note (a form of subordinated bond) in Bank of Ireland brings the assets the State holds in the banks into focus.

There is another €1.6 billion of these bonds held from AIB and €0.4 billion from PTSB.  The NPRF holds the State’s preference and ordinary shares in AIB and BOI.  These are currently valued at €8.6 billion.  The Minister for Finance holds the State’s 99.75% holding in PTSB but no value is put on this.  The same goes for Irish Life which it is hoped can be sold for €1.3 billion.

All told, the State probably has about €14 billion of remaining assets in the ‘viable’ banks.

  • €2 billion contingent convertible notes in AIB and PTSB
  • €8.6 billion of preference and ordinary shares in AIB and BOI
  • €1.3 billion through ownership of Irish Life
  • 99.75% shareholding in PTSB

These valuations for AIB and PTSB are questionable as BOI is the only bank the State has been able to sell anything from.  Still it is better to be seeing the banks as vehicles for reducing our government debt levels rather than sinkholes to increase it, not that that problem has completely gone away.


  1. yeah ! I also had hear about that

  2. I think the value of remaining assets in the 'viable' banks, when allowance is made for the medium-term timescale required, can reach 100% of par value. Furthermore, why not think beyond the medium-term when par value will likely be exceeded. Within the promissory note time-line, 2011-2031, the excess over par value will likely match the promissory note cost. Why not match up one gain against one loss. Better still, cut a good deal on the promissory note and be left with a kitty of €10-20 billion to squander another way or even use wisely.

    1. The par value of the remaining contingent capital notes in AIB and PTSB is €2 billion. The par value of the preference shares in AIB and BOI is €5.2 billion. That's €7.2 billion.

      The remaining assets then are the equity in the viable banks.
      - 15.1% of BOI
      - 99.8% of AIB
      - 99.8% of PTSB
      - 100% of Irish Life
      The cost of these was around €20 billion.

      Anglo and INBS have been provided with €35 billion - €4 billion cash in 2009 and €31 billion of Promissory Notes in 2010.

      It would be something if the equity in the viable banks raised a value close to the cost of them. But to suggest that they would pass that and cover the cost of the Promissory Note seems fanciful at best. What are the numbers for this scenario?

    2. I appreciate your comments and engagement. I have posted an article on this on progressive-economy@tasc weblog, i.e. 'Potential of Government Ownership in the 'Viable' Banks.