Is the Minister for Finance's decision to start selling down the State’s stake in Bank of Ireland a calculated well-timed move?
Or does it amount to selling the family silver, in an effort to realise some quick cash?
Those are the questions the banking and political communities are grappling with today, following this morning’s surprise announcement to the markets.
The State has been a shareholder in Bank of Ireland since 2009.
It was that year, at the height of the banking crisis, that the taxpayer began injecting what over two years eventually grew to €4.7bn in funding into the bank to keep it afloat.
Despite the difficulties it faced, the bank did manage to turn its fortunes around reasonably quickly post-crash though and €6bn has been returned to the state since.
As well as receiving cash back, the taxpayer has also retained a 14% shareholding in the bank.
It has long been Government policy that this shareholding would be sold at some point, when it made sense to do so.
In 2017, the Minister for Finance deemed the time to be right to dispose of a portion of the state’s stake in AIB through an initial public offering.
But there has been no move on the Bank of Ireland shares, until now.
Over the next six months, some of the state’s shares in the bank will be sold by degrees and in an orderly fashion, with an unspecified floor on the price at which they will be sold.
The trading plan is similar to that used by the UK government between 2014 and 2016 to privatise Lloyds.
So why the change of position?
The Minister for Finance says it is because he sees the prospects for the Irish economy and its ability to grow as very strong post-pandemic.
Paschal Donohoe believes the prospects for companies and investors are very positive and the banking system will benefit.
This optimism, the minister must hope, will continue to be reflected in the Bank of Ireland share price over the next six months – the initial timeframe earmarked for the part sale of the stake, although this could be extended.
Whether or not this perspective is borne out or not, only time will tell.
Opposition parties, including Sinn Féin, are concerned that the Minister is jumping the gun, by preparing to potentially sell off the shares prematurely to the detriment of the taxpayer.
Bank of Ireland shares are currently trading around €4.35 after hitting a low of €1.42 in April last year, at the height of the pandemic.
And shares in banks here are considered to be undervalued at present, with some upside potential.
Pre-pandemic, the share price had been teetering around the €8.00 mark, nearly twice what it is now.
Bank of Ireland has been making good headway in building capital and is currently in talks with KBC Bank Ireland that could lead to it acquiring its performing loan portfolio.
It is also reportedly still in the race to buy Davy Stockbrokers, and it is expected to receive a substantial bounce in business from the departure of Ulster Bank from the Republic of Ireland.
So taken alone or together, there are plenty of reasons then to think that Bank of Ireland's share price could rise further over the coming months and years.
But with so much uncertainty around what lies ahead with the Covid-19 pandemic, it is far from clear whether the Minister’s short-term hopes or the opposition’s long-term calculations will be realised.
Alongside the value for money argument there is also concern among banking workers that by divesting itself of Bank of Ireland shares, the state is removing its pull over the lender, just when the banking sector here is going through upheaval.
Ulster Bank is on its way out, KBC Bank Ireland may not be far behind it, leaving a much more concentrated market in which Bank of Ireland will be one of the main players.
But with so much tumult taking place, the Financial Services Union has long called for a review of the sector and it feels the state needs to hold sway over the banks for this to be successful – something it will lose if it sells its Bank of Ireland shareholding.
The decision to start winding down the Bank of Ireland stake will not, however, be accompanied by similar moves around the state’s majority ownership of the other main banks.
Paschal Donohoe said there are no plans to start selling off the 71% stake in AIB, or the 75% in Permanent TSB.
It does beg the question though, if it is a good time to start selling Bank of Ireland shares, why is it not an opportune moment to do it with them all?
Permanent TSB is currently locked in the middle of important talks with NatWest that could see it buy much of the departing Ulster Bank’s assets.
The finance minister though says there is no connection between today’s announcement and that process.
Goodbody Stockbrokers banking analyst Eamonn Hughes has suggested that selling its Bank of Ireland holdings might enable the Government to justify being involved in raising the €500m equity needed by Permanent TSB for an acquisition of Ulster Bank loans and operations.
Nor is there any connection, the Minister said, between the Bank of Ireland decision and any softening of the stance on the cap on banker’s pay.
Whatever Paschal Donohoe’s rationale though, there is little doubt that the huge changes in the Irish banking landscape look set to continue.
We remain a long way off having a fully privatised banking sector with three pillar banks and a large number of smaller alternative lenders and fintech service providers.
But right now, that looks certain to be the direction of travel.