LAURA SLATTERY
Mon, Jan 19, 2009
Irish banks lost half their value or more on the stock market today shareholders raced to offload their holdings amid fears that their value will be severely reduced or fall to zero.
Dealers described market activity as financial "carnage", as the share prices fell to their lowest ever levels.
Following the British government's announcement that its preference shares in Royal Bank of Scotland (RBS) will be converted into ordinary shares - diluting the value of the shares - the bank began its steep descent, eventually closing down 67 per cent.
Fears the same step may have to be applied to AIB and Bank of Ireland in order to recapitalise them prompted an exodus from the stocks from mid-morning on, with investors taking the view that they should get out now while they can.
By the close, AIB had plummeted 58 per cent in value, ending the day at a price of 60 cent compared to Friday's close of ¤1.45. Bank of Ireland fell almost 55 per cent to close at 34 cent, down from 75 cent on Friday.
One Dublin-based equity dealer said it appeared almost inevitable that the two banks would have to be nationalised - a fear that could prompt ongoing turmoil on the equity markets this week. Much now depends on the reaction of US investors: Wall Street was closed today for Martin Luther King day.
Irish Life & Permanent, which had held up relatively well in mid-morning and early afternoon, eventually capitulated to the panic-stricken mood, with its share price closing down 50 per cent at ¤1.10.
The spillover from the financial sector led to heavy falls on highly leveraged stocks, including Independent News & Media, which fell 25 per cent to 26 cent. Liquid stocks like DCC, Fyffes and Grafton were also hit.
© 2009 The Irish Times