Minister for Finance Paschal Donohoe has agreed to sell €1.2bn worth of shares in AIB back to the bank.

The off-market transaction will be completed shortly after AIB's AGM on 1 May, subject to shareholder approval and market conditions.

The State currently has a shareholding in AIB of just under 12%. If the transaction is completed, it will reduce the taxpayer's stake in the back by a further eight percentage points to around 3%.

“As part of AIB's FY2024 annual results the bank announced that discussions were underway with the Department of Finance for a further €1.2bn directed share buyback and I can now confirm that I have agreed in principle to participate in this buyback on a fully directed basis (subject to shareholder approval and market conditions)," Donohoe said in a statement.

"The successful completion of this transaction will see a further €1.2bn returned to the State which will be in addition to the c. €100m in dividends due to be received in May 2025 while also allowing the State to further reduce its shareholding in AIB and get closer to exiting its position in the bank.

"Further details in relation to this transaction will be announced in due course.”

The State spent €20.8bn to nationalise AIB and take on its debts during the crash.

Prior to this latest proposed transaction, the State has generated approximately €17.9bn from the sale of AIB shares.

The government started selling off AIB shares in 2017, and since 2022 it has reduced the State's shareholding from 71%.

After selling a 5% stake for €652m in January, Donohoe said it was "a realistic target" that the State could fully divest from AIB this year, depending on market conditions.

The Department of Finance is being advised by William Fry LLP in relation to the latest transaction.

(Pic: File)