By Vladimir Guevarra
LONDON–Irish bank shares continued to slide Wednesday on mounting expectations that the Irish government is likely to take a majority stake in the Bank of Ireland as part of a rescue package worth close to €85 billion from the European Union and the International Monetary Fund.
Shares in the Bank of Ireland were down 10% at €0.27. Allied Irish Banks PLC, whose government ownership will rise to around 95% after a planned rights issue, was down 19% at €0.27. Irish Life & Permanent, which so far hasn’t received any state aid, fell 0.4% to €0.75. The Irish ISEQ Financials index has fallen around 36% since Friday.
The Irish government is trying to stem its losses from the banking sector, which are largely the result of overlending in a decade-long property boom that crumbled in the financial crisis, while getting the banks to reduce their reliance on European Central Bank funding. A majority stake in the Bank of Ireland would leave Ireland without a significant lender free of state control.
Irish bank shares have been under pressure since the Irish government said Sunday that it had formally applied for tens of billions of euros in aid from the EU and IMF. Both have indicated that the money will be forthcoming, pending negotiations on the steps the government will have to take to restructure its debts and cut its budget deficit.
The government currently owns 36% of Bank of Ireland, but that could rise to 80%, based on an equity injection of around €3.5 billion, which would raise Bank of Ireland’s trough core Tier 1 ratios to 12%, said NCB Stockbrokers analyst Ciaran Callaghan.
MF Global analyst Simon Maughan also said it was likely the government would take a majority stake in the Bank of Ireland. However, Mr. Maughan says that prospect is a “suboptimal situation” and “it’s better for BoI bondholders to do a debt-for-equity swap and keep the government as a minority shareholder” in order for the Bank of Ireland to be a more independent bank. Maughan kept his sell rating on the Bank of Ireland.
The Financial Times reported that the Irish government is in talks to take a majority stake in Bank of Ireland, citing government officials.
Credit analysts at Moody’s Investors Service on Monday said they expect another €8 billion to €12 billion to be injected into Ireland’s banks, and that it would take around €0 billion to increase the core Tier 1 capital ratios of Bank of Ireland, Allied Irish, EBS and Irish Life & Permanent to 12%, above the central bank’s current 8% target.
Prime Minister Brian Cowen on Sunday said the 8% target probably wasn’t enough to appease markets. He said banks would also have to shrink their operations and sell off non-essential business lines and assets to return to health.
A spokesman from the Bank of Ireland declined to comment. A spokesperson for the Irish government couldn’t be immediately reached for comment.
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.
No comments:
Post a Comment