Another traumatic day for investors in Irish banks


IRISH FINANCIALS:IRISH SHARES suffered more heavy falls yesterday as the Iseq index dropped 7.1 per cent. Anglo Irish Bank declined 24.6 per cent and Irish Life Permanent (ILP) fell 18.9 per cent in another traumatic day for Irish bank stocks.

More than €3.6 billion was wiped off the value of Irish shares, with banks falling sharply as financial stocks declined 19.4 per cent despite a rally late in the day that dragged all bar AIB off session lows.

Investors failed to react positively to presentations from the Irish banks at a conference held by Merrill Lynch in London.

Irish banks also fell following the decision by Danske Bank, the Danish parent of National Irish Bank, to write down commercial property loans at its Irish bank.

Anglo Irish Bank was the biggest loser and ended the day at €3.005, having dipped as low as €2.68 late in the session.

Anglo Irish told the Merrill Lynch banking conference that it had no need for "external equity capital", though analysts at JP Morgan cut its price target for the bank to €4.30 from €5.90.

Credit rating agency Moody's has assigned a higher short-term debt rating to Irish Nationwide due to the guarantee, but said it would reduce this to the lower level assigned to the building society prior to the guarantee after the two-year cover is over, with a view for "possible downgrade".

NIB's parent bank, Danske, announced that a third of its loan losses in the three months to the end of September was due to bad debts on its Irish loan book.

Danske management said in a conference call on Monday that credit losses for the third quarter were estimated at 1.8 billion Danish krone (€241 million), with roughly a third of this related to the bank's Lehman exposure.

Another third, about €80 million, was attributed to losses at NIB, a dramatic increase on the loan losses of €25 million recorded for the first half of this year.

Danske chief financial officer Tony Andersen told the Merrill Lynch conference that the bank had an exposure of €2.8 billion to Irish commercial property, of which €870 million relates to developers. The bank also had an exposure of €778 million to the Irish construction and building materials sector.

Irish Life Permanent, the country's biggest mortgage lender, appointed the former chief executive of the Financial Regulator, Liam O'Reilly, who joined the company's board last month, to its audit committee, which is responsible for risk management.

The appointment comes in advance of new rules to be announced by Government as part of the bank guarantee scheme under which Minister for Finance Brian Lenihan will be able to appoint directors to the boards of Irish banks to represent the public interest and improve corporate governance across the sector.

Irish Life Permanent closed on €4.053, 18.9 per cent weaker on the day.

Bank of Ireland fell 7.3 per cent to €3.709.

The bank told the Merrill Lynch conference that it was "well capitalised" and had a "conservative asset profile".

AIB shed 14 per cent to €5.50, 50 cent above its closing price the day before the bank guarantee scheme was announced, as analysts at JP Morgan slashed its price target for the bank to €5.50 from €8.50.

Eugene Sheehy, chief executive of AIB, told the conference that it had no need to raise fresh capital from shareholders and that it intended to continue its "progressive" dividend growth, although it had not ruled out changing this policy as a potential source of future capital.

The bank announced a 10 per cent dividend increase at its results in July.