Bank shares fall as crisis deepens

 

Irish bank shares plummeted again today as the Government prepared to inject more capital and take even bigger stakes in the State’s main lenders.

Bank of Ireland's share price, which saw a colossal 23 per cent drop in its value yesterday, fell a further 33 per cent to 20.2 cents this morning. They gained back some ground this afternoon, and rose to 26.6 cent this afternoon, down 11.3 per cent from yesterday's close.

Allied Irish Bank, which already faces more than 90 per cent State ownership, slid 12.1 per cent to 29 cent earlier, but clawed its way back to 34 cent, a gain of 3 per cent on the day, while Irish Life & Permanent was down 16.3 per cent to 63 cent.

The Government is seeking to raise the core Tier 1 capital levels of its banks to between 10.5 per cent and 12 per cent, up from the Central Bank's 8 per cent target, two people familiar with the situation said yesterday.

The Government's stake in Bank of Ireland may rise to more than 50 per cent after the latest round of capital injections, said the two sources close to the banks.

Bank of Ireland would need about €3.2 billion of additional capital to bring its core Tier 1 ratio to 12 per cent, Emer Lang, an analyst Davy Stockbrokers, wrote in a note to clients today.

"Assuming the entire incremental requirement of €3.2 billion had to come from government, we estimate its stake would rise to 79 per cent," she said.

The escalating cost of the State’s bank bailout and the euro zone debt crisis also saw Irish borrowing costs rise with the yield on ten-year bonds hitting 8.886 per cent.

The difference in yield, or spread, between Irish and German 10-year yields widened to 617.6 basis points, according to Bloomberg generic data.

Speculation that Portugal will be next in line for a bailout saw the yield on its ten-year bonds hit 6.998 per cent.

Spanish 10-year yields climbed to 5.064 per cent.

The euro also continued its losses against the dollar, falling 0.3 per cent to $1.3330, extending this week's drop to 2.6 per cent.