FINANCIALS: AIB: Govt Stake Sale Another Positive

Allied Irish (AIB: A3 pos/BBB): government sells a further 5%. Recent trading statement “very strong” and spreads have managed to outperform the last month’s risk-off move – we take as another positive.

• Irish State has announced it’s sold a further 5% of the equity in the bank, reducing its shareholding to c.25.5%.
• Implicit state backing or not: as one of the two major Irish banks, we feel there continues to be an implicit state guarantee, almost irrespective of the level of government shareholding, so we certainly do not view this announcement negatively. 
• Return to normality: moreover, the fact that such sales are happening is a sign of a bank fully returning to normality which we take as a positive sign. Allied’s last trading statement (2-May) included the term “very strong performance” which is instructive, as is the equity performance (+30% YTD, Eurobanks +15%).
• Allied’s spreads have marginally outperformed in the last month’s risk-off move (+7.6bp vs. €IG banks +12bp), so there is already some positive built into these prices.