Irish bank shares perform well despite fears of knock-on effect following Renzi defeat

Maybe it was the calm before the storm but Irish bank shares performed well yesterday in spite of concerns around the future of their Italian counterparts in the wake of prime minister Matteo Renzi’s crushing defeat in a constitutional reform referendum on Sunday.

Bank of Ireland's shares closed up 2.8 per cent at 22.4 cent while Permanent TSB, which is still 75 per cent State owned, was up 1 per cent at €2.56. Both had been down in early trading but rallied before the close in Dublin.

AIB’s stock finished down nearly 9 per cent but, as it’s 99.9 per cent owned by the State and listed on the junior ESM market in Dublin, this is irrelevant.

UniCredit Group and Banca Monte dei Paschi Di Siena, who are both seeking to raise capital, fell along with most Italian bank shares after Renzi's decision to resign added to uncertainty about their plans for shoring up their finances.

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Bloomberg reported that Monte dei Paschi would decide within the next few days whether it will proceed with a planned capital increase.

The underwriters met the bank’s executives on Monday and are waiting for a formal commitment from possible anchor investors, who are said to be seeking more time to review the political situation after the referendum.

Of more interest to Irish investors is the possible knock-on effect of this uncertainty on an IPO of AIB shares by the State in 2017.

It’s too early to call that and the Government is pressing ahead with its preparations. A beauty parade of potential capital markets advisers will be held in Dublin this week.

Given the complexities that would be involved in selling 25 per cent of AIB to institutional investors via a stock market listing on the main markets in Dublin and London, it is likely that the Department of Finance will select three firms from the groups that were invited to pitch.

An appointment should be made in January, which would provide early momentum in the new year to a possible listing. Assuming, of course, that political and markets-related events don’t intervene in the meantime.