IRELAND - The National Pensions Reserve Fund (NPRF) is to undertake an independent valuation of its majority stake in Allied Irish Banks (AIB), citing the institution's publicly traded share price as an "inappropriate" measure of valuation.

The decision, coming ahead of the publication of the NPRF's annual report, has led to the appointment of stockbrokers Goodbody - which will assess the value of the scheme's 99.8% stake in the bank, consisting of both ordinary and preferential shares.

Under the direction of the country's Treasury, the NPRF's directed portfolio last year invested €8.8bn in AIB, with €5bn used to buy ordinary shares for €0.01.

As a result, the scheme's preliminary results used this as a basis of valuing its stake in the bank.

A NPRF spokesman said: "While AIB shares are traded on a public market, the free float not held by the NPRF is very small, and, therefore, it was felt it would be inappropriate to base the provisional valuation on the quoted price of AIB shares at 31 December 2011.

He added: "The NPRF has commissioned an independent fair market valuation review in respect of both its ordinary and preference share holding in AIB and will include this valuation in its annual report."

At midday, the bank's shares were trading for €0.12, having increased by more than 75% in value since closing at €0.069 at the end of December - peaking at €0.137 at the end of last week.

According to data from Bloomberg, the €0.12 share price would lead to an overall market cap of €61.6bn, ahead of other European banks that received state aid during the financial crisis.

Last year, an independent valuation of its preferential shares in AIB and Bank of Ireland by Davy Corporate Finance led to write-downs of 41.5% and 20.6%, respectively, resulting in a 25.6% loss for the scheme's directed portfolio.

Since the financial crisis began, the NPRF has seen assets under management decline significantly.

According to preliminary figures published last month, its overall value stood at €14.5bn, with the discretionary portfolio - controlled by the NPRF Commission and gradually being targeted towards domestic projects - accounting for €5.4bn.

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