Some £2 bn in savings accounts could flow into Telecom shares

Banks and building societies estimate that some £2 billion (€2.5 billion) could move from deposit accounts into Telecom Eireann shares as investors seek a better return on their savings.

The demand for capital to buy the shares remains strong with loans from £5,000 to £100,000 still being sought ahead of today's deadline for share applications.

Anyone who wishes to apply to buy Telecom Eireann shares should lodge a completed application forms at their nearest AIB bank branch by 4 p.m. today. Most financial institutions state it is still possible to secure a loan to buy the shares today if investors move quickly. The flotation is expected to make a huge dent in the deposit base of most banks and building societies. Industry sources estimates that up to £2 billion - or 4 per cent of the total Irish savings market - will move out of deposit accounts to pay for the shares. A portion of this could be quickly returned though depending on the amount of shares allocated to each individual applicant.

Mr Michael Keane, a director of the EBS building society, said the society had been extremely busy with most of its staff working to facilitate customers wishing to draw down funds held in deposit accounts to buy the shares.

"One major concern is people incorrectly putting a direct debit instruction on certain types of savings accounts. Accounts such as special savings products or notice accounts cannot be used as the direct debit would break the terms of that account" he said. Activity throughout its branch network had begun to taper off by yesterday afternoon, he added.

Mr Keane said that while the EBS would lose some of its deposit base as a result of the flotation it should be able to attract other funds as investors either sell shares or where they received substantial refunds.

A Bank of Ireland spokesman said the bank was experiencing its busiest period ever for personal lending and expected to process further loans today in the final rush.

Other institutions also reported a good level of demand for loans from customers seeking funds for the flotation.

On average, investors are tending to borrow £30,000 to £40,000 to buy the shares. Some institutions noted a big increase in the number of older or newly retired people seeking loans for the flotation. One bank noted a higher demand for loans from customers in the east compared with that in the west of Ireland.

A spokeswoman for one north Dublin credit union said it had been very busy on Friday, Monday and yesterday with a lot of customers opting to withdraw shares rather than taking out loans. Another professional credit union said it was giving out loans of £10,000 on average.

In the final day, most are expecting that any outstanding loans applications will be for relatively small amounts of £5,000 to £10,000. Funds lodged with the share application forms at AIB are being moved into a special account in the Central Bank. The holding account, into which hundreds of millions of pounds is going, is emptied twice a day. The funds are managed by the National Treasury Management Agency on behalf of the Government.