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Bank shares suffer on new Government plan for sector

BoI and PTSB shares fall as market gets to grips with new measures for sector

Bank of Ireland’s Archie G Kane: Bank of Ireland shares fell by 1.2 per cent to 23.9 cent while PTSB finished 4.9 per cent lower at €2.458. Photograph: Gareth Chaney Collins

Shares in Bank of Ireland and Permanent TSB both fell in Dublin yesterday as the markets digested measures for the banking sector included in the new Government’s partnership programme.

Bank of Ireland shares fell by 1.2 per cent to 23.9 cent while PTSB finished 4.9 per cent lower at €2.458.

Liquidity in PTSB shares is limited, given that private investors hold just 25 per cent of the stock, with the State owning the balance. But the shares are 45 per cent off the €4.50 price of its flotation a year ago.

Bank of Ireland’s shares are off almost 30 per cent since the beginning of the year.

There was a muted response from the three domestic banks to the Government’s plans for the financial sector, which include taking “all necessary action to tackle high variable interest rates”.

Collision course

This potentially puts it on a collision course with Bank of Ireland, which has refused to reduce its standard variable interest rate, preferring to focus on fixed rates.

Bank of Ireland, which is 14 per cent State-owned, declined to comment on the Government’s proposals.

Permanent TSB also declined to comment. It is understood the bank has no plans to reintroduce a standard variable rate mortgage product. Instead, it offers a managed variable rate, with lower interest costs, and has been seeking to transfer its 70,000 SVR customers to this product.

Reasonable solution

AIB, which is 99.9 per cent owned by the State, said it would study the proposals and would “naturally co-operate with any initiative that helps customers with mortgage arrears and the bank find a reasonable solution to their difficulties”.

The Government programme also includes a decision not to sell more than 25 per cent of any bank before the end of 2018. This applies directly to AIB, which is being lined up for an IPO.

In relation to its proposed IPO, the bank said: “The timing of any sale is a matter for the Minister for Finance and the government of the day. Our mandate is to be ready when that political signal comes. We are in a position now where we can respond readily to any decision of government in this regard.”

The Government has also committed to a new court to deal with mortgage arrears, with the power to impose solutions on lenders for unsustainable debt.