Bank shares rebound as Iseq rises 3.7%

Irish bank shares have rebounded strongly on news of the purchase of British bank Alliance & Leicester by Spain's Santander and the US plan to support embattled mortgage finance companies Fannie Mae and Freddie Mac.

At 9.31am the Iseq index of Irish shares was up 3.75 per cent or 165 points at 4,580.

Bank of Ireland shares rose over 9 per cent to €5.08 and Irish Life and Permanent gained almost 10 per cent by midday to €4.72.

AIB stock added 6.3 per cent to €7.82 while Anglo Irish Bank was up 3.8 per cent at €4.60.

Other risers today included C&C Group which saw its stock boosted by a broker report suggesting that the company may become a takeover target. Its stock added over 6 per cent to €2.57.

Construction stock CRH was also higher this afternoon, adding over 6 per cent to €15.40 as was Greencore which gained over 9 per cent to €1.56.

European shares were higher as banks rose on the US plan while acquisition activity buoyed sectors from brewers to banks.

By 11.32am, the FTSEurofirst 300 index of top European shares was up 1.4 per cent at 1,142.40 points, recovering from Friday's three-year low.

Banks took a cautious step towards recovery with the DJStoxx European banks index adding 2 per cent.

Fannie Mae and Freddie Mac jumped 23 and 40 per cent respectively in Frankfurt after a US Treasury and Federal Reserve plan called for sweeping measures to lend money and buy equity if needed in the government-sponsored enterprises.

Banks also gained after Spain's Santander said it had reached a deal to buy British bank Alliance & Leicester. Alliance & Leicester shot up 50 per cent, while Santander rose 0.5 per cent.

Barclays added 5 per cent, Lloyds TSB rallied 6.5 per cent and UBS gained 2 per cent.

"The fact that the US institutions and congress are bailing out the US institutions Freddie Mac and Fannie Mae draws a line under the financial system and shows that anything really important to the system will not be allowed to fail," said Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe.

Additional reporting Reuters