The Government has set the price range at which it will sell shares in AIB, pricing shares at between €3.90 and €4.90 for the Initial Public Offering (IPO).
This range values the bank at between €10.6 billion and €13.3 billion.
The AIB prospectus - a document providing all necessary information about the company and the IPO for investors - lists a range of risk factors potential purchasers should be aware of.
Many of the warnings are standard to prospectuses (such as the warning that there is no guarantee of future profits or dividends).
Others are unique to AIB, such as the fact that the Government will continue to be the dominant shareholder after the flotation.
There is also a lot of information on the changed regulatory circumstances of the banking sector in Europe, including the powers new supervision and resolution authorities.
Here are some of the more interesting risk factors taken from the headings in the prospectus, and retaining the original paragraph numbers.
1 AIB’s business may be adversely affected by any deterioration in the Irish or UK economy or in global or relevant regional economic conditions.
2 Geopolitical developments, particularly in Europe and the US, may have repercussions that could have a negative impact on global economic growth, disrupt markets and adversely affect AIB.
3 The UK's exit from the European Union or the outcome of the general election in the UK held on 8 June 2017, in which the governing Conservative Party failed to achieve a majority, could lead to a deterioration in market and economic conditions in the UK and Ireland, which could adversely affect AIB’s business, financial condition, results of operations and prospects.
4 AIB faces risks associated with the level of, and changes in, interest rates, as well as certain other market risks.
5 AIB may be adversely affected by the budgetary and taxation policies of the Irish and UK Governments and by changes in taxation law and policy elsewhere or globally.
6 AIB is subject to credit risks in respect of customers and counterparties, including risks arising due to concentration of exposures across its loan book, and any failure to manage these risks effectively could have a material adverse effect on its business, financial condition, results of operations and prospects.
7 AIB has a high level of criticised loans on its statement of financial position and there can be no assurance that it will continue to be successful in reducing the level of these loans. The management of criticised loans also gives rise to risks, including the vulnerability to challenge by customers and/or third parties, re-default, changes in the regulatory regime, further losses, costs and the diversion of management attention and other resources from AIB’s business.
8 AIB’s monitoring of its loan portfolio is dependent on the effectiveness, and efficient operation, of its processes including credit grading and scoring systems and there is a risk that these systems and processes may not be effective in evaluating credit quality.
9 AIB could be negatively affected by actual or perceived deterioration in the soundness of other financial institutions and counterparties.
10 AIB may have insufficient capital to meet increased minimum regulatory requirements.
11 Constraints on AIB’s access to funding, including a loss of confidence by depositors or curtailed access to wholesale funding markets, may result in AIB being required to seek alternative funding sources.
12 Downgrades to AIB’s, Ireland’s sovereign or other Irish bank credit ratings or outlook could impair AIB’s access to private sector funding, trigger additional collateral requirements and weaken its financial position.
13 Deferred tax assets that are recognised by AIB may be affected by changes in tax legislation, the interpretation of such legislation or relevant practices.
14 AIB faces risks from the competitive environment in which it operates and its performance may vary depending on changes in the intensity and source of this competition.
18 Restrictions on executive fixed and variable pay, the existence of an additional tax on bonuses paid to employees of Irish banks who have received financial support from the Irish Government, the UK’s withdrawal from the EU, macro-economic and other factors may adversely affect AIB’s ability to recruit, retain and develop appropriate senior management, skilled and specialist personnel, and may lead to employee dissatisfaction generally.
19 AIB’s employees have been affected by a number of developments in recent years, including significant headcount reductions, reductions in compensation and a significant level of change across the organisation, and these developments may give rise to employee dissatisfaction and/or tensions with trade unions.
20 The proper functioning of information technology and communications systems and its related operational processes are critical to AIB’s success and these may not operate as expected, including as a result of technical failures, human error, unauthorised access, cybercrime, natural hazards or disasters, or similarly disruptive events.
27 AIB’s financial results may be negatively affected by changes to, or application of, accounting standards.
28 AIB faces the risk that the funding position of its defined benefit pension schemes will deteriorate, requiring it to make additional contributions, adversely affecting its capital position.
33 The BRRD contains resolution tools and other measures that may have a material adverse effect on Shareholders.
38 Irish legislation and regulations in relation to mortgages, as well as judicial procedures for the enforcement of mortgages and custom, practice and interpretation of such legislation, regulations and procedures, may result in higher levels of default by AIB’s customers, delays in AIB’s recoveries in its mortgage portfolio and increased impairments.
39 AIB’s loan book (in particular, its residential mortgage book) may become subject to further supervision and scrutiny by the Irish Government, the Central Bank and the CCPC, which could result in regulation and control of AIB’s loan book and therefore result in a reduction in AIB’s level of lending, interest income and net interest margin and/or increased operational costs.
40 LTV/Loan-to-income (‘‘LTI’’) related regulatory restrictions on residential mortgage lending may restrict AIB’s mortgage lending activities and balance sheet growth generally.
42 Pursuant to the Relationship Framework, certain other agreements entered into between the company and the Government and certain general legislative powers, the Government has, and will from admission have, the right to exercise a degree of influence over certain specified aspects of AIB’s activities.
52 Any person that intends to acquire or dispose of 10% or more of the Ordinary Shares will be required to notify the ECB, the Central Bank and the FCA and any such transaction may not proceed if the ECB or such other relevant regulator opposes the transaction within the prescribed period of time.
