Bank shares slide on Irish market

Shares in Irish banks dipped this morning on concerns over the powers that new legislation covering the banks would give to the Government.

AIB dipped 15.6 per cent to 38 cent this morning following a report that the Government may use its new powers to take full control of the lender as early as this week, before regaining some ground this afternoon.

The Credit Institutions (Stabilisation) Bill is part of a plan to fix the country's banking system and gives the Government power to alter bondholders' rights on repayment of interest and debt
and to appoint managers to banks if needed.

The Sunday Business Post said yesterday that the State may take AIB off the stock exchange, without citing anyone.

AIB needs to raise €9.8 billion by the end of February to meet new capital standards. The company has lost since 98 per cent of its value since February 2007.

"If the nationalisation of Allied Irish was to happen quickly, it may take some investors by surprise," said Ciaran Callaghan, an analyst with Dublin-based NCB Stockbrokers. "The Government's previous intention was to keep the bank quoted."

The State already controls about 18.6 per cent of the lender after injecting €3.5 billion, and the Government is likely to be left with a stake of about 95 per cent after putting more cash into the bank, Glas Securities Ltd, a Dublin-based fixed income firm, said in a note to clients last week.

AIB said it transferred €9.3 billion of loans for a further 217 customers to the National Asset Management Agency. An aggregate discount of 59 per cent has been applied to these loans, the bank said. Shares in the bank were 8.9 per cent lower at 1pm, falling to 41 cent from this morning's opening level.

Bank of Ireland fell 7.5 per cent by 11.20am, trading at 29.5 cent, but later reversed that loss into a gain of 4.5 per cent, trading at 33.3 cent by 1pm.

Irish Life and Permanent was also down, falling more than 6 per cent earlier today, but was trading 1 per cent off at 95 cent by 1pm.

Bank of Ireland recently has secured acceptances of €1.4 billion for its senior for subordinated debt swap offer. This generated a higher-than-expected €700 million equity towards its €2.2 billion capital target. Davy Stockbrokers said the provisions contained in the new Credit Institutions (Stabilisation) Bill would "no doubt have influenced holders of the debt".

Additional reporting: Bloomberg