Financials extend fall in morning trading

Iseq: 3,142.16 (–15.34) at 12.45:The Iseq index was down marginally at 12.45 today with declines led by Allied Irish Banks ahead of the Minister for Finance's statement later today on the future of five key financial institutions.

A Dublin-based broker noted activity focused on the banks this morning as the markets await details of the National Asset Management Agency (Nama) transfers and further Government recapitalisation of the banks later today, with AIB suffering more due to the expectation it will require greater levels of recapitalisation.

At 12.45pm, AIB shares were down by 15.89 per cent to €1.14; Bank of Ireland had fallen by 0.482 per cent to €1.23, after rising earlier; while Irish Life & Permanent was also in negative territory - down 0.346 per cent, to €1.21.

Media reports that the Government could end up owning 40 per cent of Bank of Ireland and 70 per cent of AIB had a serious impact on both banks on the Iseq yesterday. AIB bore the brunt of the sell-off, and saw nearly 20 per cent – or 33 cent – wiped off its share price.

Minister for Finance Brian Lenihan is to unveil a recapitalisation plan for the banks today. Nama will release details of the discounts on the first loans transferred from the institutions before the Minister’s statement. Irish Nationwide and EBS will transfer the first loans today.

Irish banks will require up to €22 billion to cover losses on property loans moving to Nama and higher future losses on other loans as they meet strict new rules set by the Financial Regulator, The Irish Timeshas learned. AIB requires some €6 billion to €7 billion, while Bank of Ireland will need €2.5 billion to €3 billion.

Brokers also noted building group McInerney Holdings was down 8.57 per cent after reporting a loss before tax of €25 million in 2009. Financial services company IFG Group fell earlier in the day but later recovered after reporting a full-year revenue fall - of €93.3 million - that was not a bad as forecast.

Elsewhere, the euro hit a two-month high against the yen today on relief that Greece was able to raise funds from the market, though gains were quickly trimmed as wider euro zone fiscal concerns weighed on sentiment.

Extending its rally from last week, the euro hit its strongest versus the yen in nearly two months, while edging up to a one-week high against the dollar as traders locked in profits on short euro positions, which peaked last week.

But analysts saw limited upside potential given that the euro zone's debt problems and weak growth mean the European Central Bank is in no rush to hike interest rates.

The dollar fell around 0.2 per cent against a currency basket to 81.155, its lowest in nearly a week, as European shares rose 0.3 per cent and oil prices were supported around $82/barrel.

The US currency edged up against the yen to 92.52 yen. Traders reported strong UK clearer selling capping the pair.