Department of Finance officials flagged concerns that the latest sale of AIB shares which would leave the state shareholding below 50% would reignite debate over restrictions on pay for senior bankers there.
Civil servants told Finance Minister Michael McGrath that the state having a minority share in the bank would mean little "in practical terms", but would be seen as a significant milestone.
A submission on the latest stage of Project Viking, the selling down of the state's stake in AIB, said: "Such an outcome will garner media attention as there is now a strong perceived link with possible further changes in remuneration restrictions.
"This is something the Minister may wish to consider … however, we would not wish such considerations to delay any share sale if conditions are right."
The state ended up selling a significant chunk of their AIB shares in late June yielding €480.5 million and reducing their shareholding in the bank from 51.9% to 46.9%.
Officials said the €3.64 per share price was the "highest we believed we could push investors without losing significant orders" according to a post-sale briefing for the finance minister.
It said there had been strong demand from investors and that in the aftermath, AIB shares had traded in a range that the Department of Finance was happy with at between 2.5 and 3.85%.
They said investors needed to see the stock "trade higher immediately" after such a sale, but that the department had not wanted it to go any higher than 4%.
The submission also explained how even though the state's share of AIB had reduced further, the Exchequer was still sitting pretty in terms of the value of what was left.
"While the State’s shareholding in AIB has reduced since the beginning of 2022, the value of our shareholding today is €504 million higher than at the start of the year given the upward trajectory of AIB’s share price over this period," said the submission.
A pre-sale submission had detailed how banks had been on a "great run" over the past year but that they were starting to wane in popularity.
It said many investors believed the recent spate of interest rate hikes by the European Central Bank had "largely played itself out" in terms of its likely impact on the value of banking shares.
The submission added: "With the share price over a third higher than where our last block trade was done last November [€2.96], in the absence of a change in Government policy, the market will be puzzled if we remain inactive."
In a note approving the sale, Minister Michael McGrath wrote: "I approve undertaking a block sale of up to 5% of AIB shares at this time subject to prevailing market conditions. Separately, in relation to variable pay and the restriction on total compensation, I will keep the current policy under review."
Separately, one of the department submissions said the recent string of ECB rate hikes had been "very positive for Irish banks" which were among the most "rate sensitive" in Europe.
Asked about the records, the Department of Finance said they had nothing further to add.
Reporting by Ken Foxe
