On Friday last, 6th November 2015, I welcomed the announcement from AIB that the bank had received approval from its regulator, the SSM (Single Supervisory Mechanism), for a significant reorganisation of its capital structure. The approved reorganisation allows for a redemption of the 2009 Preference Shares, to the value of €1.7 billion for the State, as well as a conversion of the remaining Preferences Shares into ordinary equity. This is a key step in returning capital to the taxpayer, in recognition of the significant investment made in the bank during the financial crisis, while it also regularises the bank's capital structure making it compliant with new regulatory requirements.
In relation to future returns, the State's €3.5 billion of preference shares delivered a cash dividend of €280 m earlier this year and a further payment of accrued dividend will be made on conversion/redemption of the shares in the coming months to reflect the dividend outstanding at that time.
Next year, the Contingent Capital Notes, or "CoCos", which were issued by the State to AIB in July 2011 are due to mature. At this point the State can expect to receive their full value of €1.6 billion, plus a full year of accrued interest amounting to €160 million in cash.
With regard to any future payment of dividends on Ordinary Shares, this is a matter for the Board of AIB and their regulator. However, following the capital reorganisation and with AIB now returned to sustainable profitability, I believe it is reasonable to assume that the bank could begin to start paying a dividend to shareholders at some point next year. I cannot be specific about the exact timing and quantum of any dividends however, given the fiduciary and regulatory obligations involved.
As I have stated previously, any decision in relation to the ultimate sale of the State shareholding in AIB will be a matter for the next Government.
As previously indicated, all capital returned from the State's investments in the Irish banks, will be used to reduce the national debt.