Irish shares soaring
Shares in Ireland's three main banks soared on Monday after the Government agreed to inject £5.3 billion into the trio, taking one under its control, in a move that should boost lending to firms and homeowners...
Anglo Irish Bank shares rose nearly 17 per cent on the plan, which will give the Government 75 per cent control of the lender and eased fears it could collapse.
Bank of Ireland shares rallied by over a third and Allied Irish Banks jumped by more than a fifth. They will get a capital boost in return for giving the state 25 per cent of voting rights on major issues.
'While the market will want to see some significant equity issuance in the New Year, this is a good start,' said analyst Scott Rankin of Davy Research in a note.
'On top of the 5.5 billion euros, the Government says that it 'has a substantial pool of additional capital available to underwrite and otherwise support the issuance of core tier 1 capital'. This should help put a floor under the banks and get us into the New Year.'
The Government announced late on Sunday it would make an initial investment of 1.5 billion euros in Anglo Irish Bank, giving it control and a fixed annual dividend of 10 per cent. Dublin said it would make further capital available if required.
The Government will also invest £1.8 billion each in market leaders Bank of Ireland and Allied Irish through preference shares.
Investors have been waiting for months for a bailout plan to match schemes in other countries and pressure intensified last week after Anglo Irish revealed its chairman had kept shareholders in the dark about 87 million euros worth of loans he had received from the lender.
'The Government's commitment to make further capital available ensures that the bank will continue to be a sound and viable institution,' Anglo Irish Chairman Donal O'Connor said in a statement.
Bank of Ireland said the injection would strengthen its capital base and give it the flexibility to raise more cash, and was positive for it and the Irish bank sector.
'It brings certainty at a time of great volatility and aids our ability to continue to support our customers and provide a meaningful return to our stockholders in the medium term,' Brian Goggin, BoI Chief Executive, said.
Goggin said the raising of an extra 1 billion euros could come from issuance of new shares and/or preference shares, but only if it can be done on acceptable terms for existing investors.
The plan will lift BoI's core tier one capital ratio to eight per cent from 6.3 per cent at the end of September, in line with European peers after recent cashcalls. The ratio would rise to near nine per cent if it raised the extra £947 million, it said.
Allied Irish Banks (AIB) also said it was aiming to raise an additional 1 billion euros from shareholders.
'We do feel this has a good chance of stabilising the banks -- whilst the quantum is smaller than we had hoped for, the implicit guarantee that the Irish Government will do what it takes should help the banks in the near term,' said Alex Potter, Analyst at Collins Stewart.
By 1009 GMT Anglo Irish Bank's shares were up 16.4 per cent in London at 31 euro cents. Bank of Ireland was up 36 per cent at 90 cents and AIB was up 20.5 per cent at 1.99 euros.
Shares in Irish Life & Permanent, which did not receive a state investment, was up 8.9 per cent to 1.60 euros.
Source: Money AM