Another good day for Irish bank shares

IRISH BANK shares kept climbing yesterday as the market was buoyed by another US bank, Bank of America, posting better-than-expected results.

The shares rose despite investors shunning an emergency fundraising at the UK's biggest home lender HBOS.

Anglo Irish Bank gained the most, rising 10.3 per cent to €5.96.

Irish Life & Permanent climbed 6.7 per cent to €6.05. The stock rose 15 per cent at one point.

Bank of Ireland rose 6.6 per cent to €5.94; AIB gained 3 per cent to €8.76.

Financial stocks climbed to their July 3rd levels, but are still down 31 per cent since June 1st.

Anna Lalor, analyst at Goodbody Stockbrokers, said some investors were buying to cover short positions on shares falling and that the market still needed clarity on bad debts in the economic downturn. "I would not be jumping for joy just yet."

Investors were unperturbed by a report from New York management consultants Oliver Wyman and Swedish debt collector Intrum Justitia which estimated that European banks would post further losses of €120 billion on loans.

The report said losses would "rapidly increase" until 2010, especially in Ireland, Britain and Spain. Losses would be €400 million higher in Ireland than 2007 levels.

Bank of America, the largest US retail bank, posted lower but better-than-expected quarterly profits, offsetting an increase in bad debts linked to falling house prices and a slowing economy.

The bank's results led to a fall in the cost of protecting investors against debt defaults. Credit default swaps for Anglo Irish Bank fell 17 basis points to 306.

HBOS said just 8.29 per cent of shareholders took part in its £3.8 billion (€4.8 billion) rights issue, leaving underwriters Morgan Stanley and Dresdner each with shares worth £1.3 billion. Shareholders signed up to buy just 124 million shares after the share price fell below the offer price of 275p amid fears about UK banks.

National Australia Bank was linked with a bid for HBOS's Australian business last month which led to speculation about the future of the bank's Irish operations - Bank of Scotland (Ireland) and its retail bank network Halifax.

However, HBOS is expected to reiterate its commitment to its overseas businesses in its interim results statement next week.

Ms Lalor said HBOS had made progress in the Irish market and would want to retain its interest in Ireland given that it was close to its UK base and they shared some operations.