Report on my “gamble on AIB” suggestion

On Feb. 28 I wrote a piece entitled “A Gamble on AIB today?” (see below), in which I recommended a flutter on AIB at that time. I’m happy to say !..yes, happy, because at that time the share was c. 1.00 euro, and it since–almost immediately- rose to c. 1.65 euro last week…an enormous profit in a couple of weeks or three.

Those of you who bought and then sold at that price (- this group does not include myself-), will be amused to see that the price fell to c. 1.40 yesterday and is now at c. 1.10 !!–almost all the way down again. The herd is in panic at the prospects of this afternoons announcement on what the NAMA transfer price will be, etc. That group of smart investors should be readying themselves to jump back in as soon as possible after the Minister’s statement. The gamblers will go in before his statement.

I dont believe he will take a majority or any substantial minority position in AIB. It simply doesn’t make sense. In fact, ‘twould be better if he agreed to take back his €3.5 billion and pass his preference shares and warrants to shareholders in a rights issue. That would leave the bank more attractive to prospective investors of an additional few billion to restore capital ratios, at a price of, say €5-7 euros a share.

In my humble opinion, AIB is fundamentally worth €15 euros a share or more, after these few billion in write offs are taken care of in a couple of years time. Just look around the eurozone at comparable banks- many of them in deep gratitude-for-government-aid mode- whose shares are trading at 15 times core earnings and more . AIB’s core earnings are €2 euros a share !

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