Irish savers are sitting on almost €100bn - are AIB shares worth a punt?
The four-week countdown to the stockmarket listing of up to 25% of AIB, began last night when Finance Minister Michael Noonan, confirmed the bank’s 'Intention to Float.'
While these shares will be aimed at institutional investors such as large banks and pension funds who want a long term investment, a proportion is also set to be made available to individual retail investors. The minimum buy-in is €10,000.
Eoin McGee of Prosperous Financial Planning joined Vincent Wall on Breakfast Business to discuss the IPO.
He thinks it is important that potential retail investors understand the risk associated with putting €10,000-plus down on one company's shares.
Mr McGee believes average investors should not be "going near" these shares.
"Individuals' money sitting in bank accounts around Ireland is almost €100bn. It's more than we've ever had before. We have interest rates which are lower than we've ever had before. Therefore, the attraction to move some of your money from deposit into something like this is very high because all the media hype over the next few weeks will be around AIB," he told Newstalk.
The advisor added that people are likely to invest in the company because they are familiar with it. He believes that despite the bank's recent strong performance and its growth prospects, investing is a gamble:
"If you want to buy AIB go for it - but treat the €10,000 minimum that you're going to put into it the same way you would if you were going out to Fairyhouse."
These comments were levelled at any potential investment for a retail investor which is dependent on one company's shares: "It's nothing to do with AIB per say - it's about individuals buying individual shares. The problem with buying one (company's) share is that you have no diversification."
He warned that most company's shares fall in the 12 months after their IPO.
Mr McGee believes that best way to get involved in the IPO is to think of it as a longterm play, describing it as a way to generate money for your "grandkids."
Potential investors must be registered with a stockbroker and retail investors will be putting their money forward at the highest indicated price per share listed in the prospectus - even though it is not guaranteed to reach that price.
When the flotation comes, these investors are not guaranteed to get all of the shares that they've requested.
AIB registered a €1.7bn profit before tax for 2016 - and announced plans to pay a €250m dividend to the State.
Its new lending in Ireland increased by 16% as loans of €12.9bn were approved.
The bank also had a 39% share of new lending drawdowns in the final quarter of 2016 - suggesting it is on course to attract more business as demand for new mortgages remains strong and more properties come onto the market in the coming years.