AIB shares

Just wondering what the thoughts are about the possibilities of these shares ever recovering, and the timeframe it might happen?

bridgepeople

AIB shares are not currently investable. The Irish government is for all intents and purposes the sole shareholder currently. If you want to take a punt on a recovery in the Irish banking sector, Bank of Ireland is your only option right now.

Other Irish financials that might be of interest are FBD and IFG.

More asking because my old man has a load of them and just wondering if they are ever gona come good again?

bridgepeople

Deleted User wrote: »

More asking because my old man has a load of them and just wondering if they are ever gona come good again?

Ah I see. Did he buy them recently or hold them right through the crash? In any case, the shares of AIB are currently artificially inflated by a very low free float (i.e. there are very few in circulation as the government owns 99.7% of the company).

At the moment, the market cap of Bank of Ireland is €4.3 billion whereas AIB is valued at €39.1 billion. Bank of Ireland is a better and more valuable company than AIB. Hence I would estimate that the AIB share price is currently overvalued by something like 15 times its true worth for technical reasons.

Given that the shares are overvalued to the tune of approximately 1500%, I would recommend your father sells his shares and reinvests elsewhere.

He bought them before the crash and his plan is to hold onto them until they 'recover' which in his mind could be ten years if necessary. I think it would be a hard slog to convince him to sell them all now and take such a big hit on what he paid for them unless there is was no chance of ever recovering.
Even if they are overvalued now, say the sector and economy recovers in the next ten years is there anything to stop the shares going back up again to the levels he bought them at? The gist of what I've heard is its not good to own shares in gov owned banks, but taking norway for example the government owns lots of shares in banks and they are performing well on the stock market.

bridgepeople

Deleted User wrote: »

He bought them before the crash and his plan is to hold onto them until they 'recover' which in his mind could be ten years if necessary. I think it would be a hard slog to convince him to sell them all now and take such a big hit on what he paid for them unless there is was no chance of ever recovering.
Even if they are overvalued now, say the sector and economy recovers in the next ten years is there anything to stop the shares going back up again to the levels he bought them at? The gist of what I've heard is its not good to own shares in gov owned banks, but taking norway for example the government owns lots of shares in banks and they are performing well on the stock market.

The answer to the question in bold is a resounding yes. At its peak, the market cap of AIB (i.e. the combined value of all the shares in issue) was in the region of €15-20 billion I believe. As I mentioned before, it is now trading at a share price which implies a market cap of almost €40 billion. Yes that's right. AIB is currently worth twice its 'peak' value if you believe the share price.

The reason AIB could never approach anywhere near its peak share price again is because there are now over 500 billion shares in issue. To put that in context the market cap of Apple, the world's largest company, is around €320 billion right now. So if AIB shares recovered to 62 cents, still far from peak levels, AIB would become the most valuable company in the world.

Somehow I struggle to see AIB overtaking Apple any time soon! Hopefully that will help explain to your father why he should sell now.

Interesting stuff indeed, thanks for your input

veryangryman

Fast forward 2.5 years.

Im noticing AIB is still hovering around 10c. Still not worth a punt? I guess not as would have had fingers burnt (or singed anyway) 2 years back.

hfallada

veryangryman wrote: »

Fast forward 2.5 years.

Im noticing AIB is still hovering around 10c. Still not worth a punt? I guess not as would have had fingers burnt (or singed anyway) 2 years back.

No. They are completely overvalued. The Government will start selling them and the stock price will plummet. There is plenty of value bank shares out there eg HSBC with a 5% dividend